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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission File Number 001-36794
The Chemours Company
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or other Jurisdiction of Incorporation or Organization)
46-4845564
(I.R.S. Employer Identification No.)
1007 Market Street, Wilmington, Delaware 19899
(Address of Principal Executive Offices)
Registrant’s Telephone Number: (302) 773-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock ($.01 par value)
Name of Exchange on Which Registered
New York Stock Exchange
Securities are registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act).
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes o
No x
Yes o
No x
Yes x
No o
Yes x
No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer" and "large
accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o
No x
The registrant’s separation from E. I. du Pont de Nemours and Company became effective on July 1, 2015. As a result, there was no aggregate market value of
common stock held by non-affiliates of the registrant as of June 30, 2015, the last business day of the registrant’s most recently completed second fiscal quarter. As of February
19, 2016, 181,376,949 shares of the company's common stock, $0.01 par value, were outstanding.
Documents Incorporated by Reference
Portions of the registrant's definitive proxy statement relating to its 2016 annual meeting of shareholders (2016 Proxy Statement) are incorporated by reference into Part III of this Annual Report
on Form 10-K where indicated. The 2016 Proxy Statement will be filed with the U. S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report
relates.
Table of Contents
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5 .
Item 6.
Item 7 .
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Signature s
The Chemours Company
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Executive Officers of the Registrant
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
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Forward-Looking Statements
This section and other parts of this Annual Report on Form 10-K contain forward-looking statements, within the meaning of the federal securities law, that involve
risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does
not directly relate to any historical or current fact. The words "believe," "expect," "anticipate," "plan," "estimate," "target," "project" and similar expressions,
among others, generally identify “forward-looking statements,” which speak only as of the date the statements were made. The matters discussed in these forward-
looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those set forth in the forward-looking
statements. Factors that could cause or contribute to these differences include those discussed below and in the Item 1A, "Risk Factors."
Forward-looking statements are based on certain assumptions and expectations of future events which may not be accurate or realized. Forward-looking statements
also involve risks and uncertainties, many of which are beyond Chemours’ control. Important factors that may materially affect such forward-looking statements
and projections include:
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Fluctuations in energy and raw material prices;
Failure to develop and market new products and optimally manage product life cycles;
Our substantial indebtedness and availability of borrowing facilities, including access to our revolving credit facilities;
Uncertainty regarding the availability of additional financing in the future, and the terms of such financing;
Negative rating agency actions;
Significant litigation and environmental matters, including indemnifications we were required to assume;
Failure to appropriately manage process safety and product stewardship issues;
Changes in laws and regulations or political conditions;
Global economic and capital markets conditions, such as inflation, interest and currency exchange rates, and commodity prices, as well as regulatory
requirements;
Currency related risks;
Business or supply disruptions and security threats, such as acts of sabotage, terrorism or war, weather events and natural disasters;
Ability to protect, defend and enforce Chemours’ intellectual property rights;
Increased competition and increasing consolidation of our core customers;
Changes in relationships with our significant customers and suppliers;
Significant or unanticipated expenses, including but not limited to litigation or legal settlement expenses;
Our ability to predict, identify and interpret changes in consumer preference and demand;
Our ability to realize the expected benefits of the separation;
Our ability to complete proposed divestitures or acquisitions and our ability to realize the expected benefits of acquisitions if they are completed;
Our ability to deliver cost savings as anticipated, whether or not on the timelines proposed;
Our ability to pay or the amount of any dividend; and,
Disruptions in our information technology networks and systems.
Additionally, there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on
our business. The Company assumes no obligation to revise or update any forward-looking statement for any reason, except as required by law.
Unless the context otherwise requires, references herein to “The Chemours Company,” “The Chemours Company, LLC,” “Chemours,” "the Company", "our
company", “we,” “us,” and “our” refer to The Chemours Company and its consolidated subsidiaries. References herein to “DuPont” refers to E.I. du Pont de
Nemours and Company, a Delaware corporation, and its consolidated subsidiaries (other than Chemours and its consolidated subsidiaries), unless the context
otherwise requires.
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Item 1. BUSINESS
Overview
PART I
Chemours, a leading global provider of performance chemicals, began operating as an independent public company on July 1, 2015 (the Distribution Date) after
separating from E. I. du Pont de Nemours (DuPont). We have three reporting segments: Titanium Technologies, Fluoroproducts and Chemical Solutions. Our
products are key inputs into end-products and processes in a variety of industries. Our Titanium Technologies segment is the leading global producer of titanium
dioxide (TiO 2 ), a premium white pigment used to deliver whiteness, brightness, opacity and protection in a variety of applications. Our Fluoroproducts segment is
a leading global provider of fluoroproducts, such as refrigerants and industrial fluoropolymer resins. Our Chemical Solutions segment is the leading North
American provider of industrial and specialty chemicals used in gold production, oil refining, agriculture, industrial polymers and other industries.
Effective prior to the opening of trading on the New York Stock Exchange (NYSE) on July 1, 2015, DuPont completed the separation of the businesses comprising
DuPont’s Performance Chemicals reporting segment, and certain other assets and liabilities, into Chemours, a separate and distinct public company. The separation
was completed by way of a distribution of all of the then-outstanding shares of common stock of Chemours through a dividend in kind of Chemours’ common
stock (par value $0.01 ) to holders of DuPont common stock (par value $0.30 ) as of the close of business on June 23, 2015 (the Record Date) (the transaction is
referred to herein as the Distribution).
On the Distribution Date, each holder of DuPont's common stock received one share of Chemours' common stock for every five shares of DuPont's common stock
held on the Record Date. The spin-off was completed pursuant to a separation agreement and other agreements with DuPont related to the spin-off, including an
employee matters agreement, a tax matters agreement, a transition services agreement and an intellectual property cross-license agreement. These agreements
govern the relationship between Chemours and DuPont following the spin-off and provided for the allocation of various assets, liabilities, rights and obligations.
These agreements also include arrangements for transition services to be provided by DuPont to Chemours.
We operate 35 production facilities located in 11 countries and serve more than 5,000 customers across a wide range of end markets in more than 130 countries.
The following chart illustrates the global scope of our businesses:
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Chemours is committed to creating value for our customers through the reliable delivery of high quality products and services around the globe. We create value
for customers and stockholders through (i) operational excellence and asset efficiency, which includes our commitment to safety and environmental stewardship,
(ii) strong customer focus to produce innovative, high-performance products, (iii) focus on cash flow generation through optimization of our cost structure, and
improvement in working capital and supply chain efficiencies through our transformation plan (described in Chemours Strategy section below), (iv) organic
growth and (v) creation of an organization that is committed to our corporate values of safety, customer appreciation, simplicity, collective entrepreneurship and
integrity.
Many of Chemours' commercial and industrial relationships have been in place for decades. Our customers are comprised of a diverse group of companies, many
of which are leaders in their respective industries. Our sales are not materially dependent on any single customer. As of December 31, 2015, no one individual
customer balance represented more than five percent of Chemours’ total outstanding receivables balance and no single customer represented more than ten percent
of our sales.
Chemours Five-Point Transformation Plan
Immediately after Chemours was launched as an independent public company, we began to make changes to our organization, cost structure and portfolio of
businesses to transform our company into a higher growth chemistry company. The objectives of our multi-year five-point transformation plan are to improve our
financial performance, streamline and strengthen our portfolio and reduce our leverage by:
1. Reducing our costs through a simpler business model;
2. Optimizing our portfolio to focus on our businesses where we have leading positions;
3. Growing our market positions where we have competitive advantages;
4. Refocusing our investments by concentrating our capital expenditures on our core businesses; and
5. Enhancing our organization to deliver our values and support our transformation to a higher-value chemistry company.
Through cost reduction and growth, Chemours expects the transformation plan to deliver $500 million of incremental Adjusted EBITDA improvement over 2015
through 2017. Based on our anticipated cost reduction and growth initiatives, we would expect an approximately similar improvement in pre-tax income. Adjusted
EBITDA is a non-GAAP financial measure. For a discussion of our use of non-GAAP financial measures and reconciliations to the closest GAAP financial
measures, see our Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures in Item 7. Through a
combination of higher free cash flow from operations, lower capital spending, and potential proceeds from asset sales, the Company anticipates reducing its
leverage ratio (net debt to Adjusted EBITDA) to approximately three times by 2017. This plan will allow us to narrow our focus to businesses with the highest
return and earnings growth potential.
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In our Titanium Technologies segment, we have a long-standing history of delivering high-quality TiO 2 pigment using our proprietary chloride technology. We are
the largest global producer of TiO 2, and our low-cost network of manufacturing facilities allows us to efficiently and cost-effectively serve our global customer
base. We expect to further enhance our operating cost advantage with the start up of our second production line at our Altamira, Mexico facility in 2016. Chemours
is well positioned to remain the lowest cost TiO 2 producer and continue to meet our customers’ growing needs around the world.
In Fluoroproducts, we are one of two globally integrated producers making both fluorochemicals and fluoropolymers. In Fluorochemicals, we expect to market
Opteon™, the world’s lowest global warming potential refrigerant, around the world as governments pass legislation that makes the use of low global warming
potential refrigerants a requirement. We will also apply our application expertise across our fluoropolymers offerings, providing our customers with tailored
products that have unique properties, including very high temperature resistance and high chemical resistance. We will continue to invest in research and
development to remain a leader in these areas, and ensure that we are able to meet our customers needs as regulations change.
In Chemical Solutions, we are investing in our cyanides business to increase capacity by 50 percent. This additional capacity will allow us to serve the growing
demand for sodium cyanide in the gold mining industry in the Americas. We also made significant progress on our strategic review of our portfolio, including the
announced sale of the Beaumont Aniline facility, planned exit of the Reactive Metals business, and decision to retain the Methylamines business. We plan to
complete our strategic review of this segment in 2016, which is ultimately expected to result in a streamlined set of businesses with reduced capital requirements.
We will maintain our commitment to responsible stewardship and safety for our employees, customers and the communities where we operate. Meeting and
exceeding our customers’ expectations while conducting business in accordance with our high ethical standards will continue to be a primary focus for our
company as we continue to transform Chemours into a higher-value chemistry company.
Segments
Additional information on our segments can be found in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 23 to
the Consolidated Financial Statements.
Titanium Technologies Segment
Segment Overview
Chemours' Titanium Technologies segment is the leading global manufacturer of TiO 2 . TiO 2 is a pigment used to deliver whiteness, opacity, brightness and
protection from sunlight in applications such as architectural and industrial coatings, flexible and rigid plastic packaging, PVC window profiles, laminate papers,
coated paper and coated paperboard used for packaging. We sell our TiO 2 products under the Ti-Pure TM brand name to over 800 customers globally. We operate
four TiO 2 production facilities: two in the United States (U.S.), one in Mexico and another in Taiwan. In addition, we have a large-scale repackaging and
distribution facility in Belgium and operate a mineral sands mining operation in Starke, Florida. In total, we have a TiO 2 production capacity of 1.05 million metric
tons per year. We are expanding our TiO 2 production facility in Altamira, Mexico which will increase our total TiO 2 production capacity to 1.25 million metric
tons per year.
Chemours is one of a limited number of producers operating a chloride process for the production of TiO 2 . We believe that our proprietary chloride technology
enables us to operate plants at a much higher capacity than other chloride technology- based TiO 2 producers, uniquely utilizing a broad spectrum of titanium-
bearing ore feedstocks and achieving the highest unit margins in our industry. This technology, which operates at all of our production facilities, provides us with
one of the industry’s lowest manufacturing cost positions. Our research and development efforts focus on improving production processes and developing TiO 2
grades that help our customers achieve optimal performance in both their cost and product performance.
Demand for TiO 2 comes from the coatings, paper and plastics industries and is highly correlated to growth in the global residential housing, commercial
construction and packaging markets. Industry demand for TiO 2 is generally expected to be in line with global GDP, and can be cyclical due to economic and
industry-specific market dynamics.
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A breakdown of our TiO 2 sales by region and end-market is shown in the charts below:
* include specialty applications
We sell approximately 20 different grades or forms of TiO 2 , each tailored for different applications to address undertone, dispersion and other application criteria
for different end uses.
We have operated a titanium mine in Starke, Florida since 1949. The mine provides us with access to a low cost source of domestic, high quality ilmenite feedstock
and supplies less than ten percent of our feedstock consumption needs. Co-products of our mining operations are zircon (zirconium silicate) and staurolite minerals.
We are a major supplier of high quality zircon in North America, primarily focused on the precision investment casting (PIC) industry, foundry and specialty
applications, and ceramics. Our staurolite blasting abrasives, sold as Starblast™, are widely used in steel preparation and maintenance, and paint removal.
Industry Overview and Competitors
Worldwide effective capacity in 2015 was estimated to be approximately 6.5 million metric tons. This capacity base was more than sufficient to serve worldwide
demand for TiO 2 in 2015 of approximately 5.5 million metric tons.
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The global TiO 2 market in which we operate is highly competitive. Competition is based primarily on product price, quality and technical service. We face
competition from producers using the chloride process as well as those using the alternative sulfate process. Furthermore, due to the low cost of transporting TiO 2 ,
there is also competition between producers with production facilities located in different geographies, with some cost advantage belonging to the production
facility that is closest to the customer.
In most regions of the world, we compete primarily against large multinational producers such as The National Titanium Dioxide Company, Ltd. (Cristal),
Huntsman International LLC, Kronos Worldwide, Inc. and Tronox Limited. In recent years, manufacturing capacity of those multinational producers has only
modestly increased, primarily due to de-bottlenecking of the industry’s existing production facilities. Overall, in 2015, approximately 250,000 metric tons of
capacity was taken offline and another approximately 170,000 metric tons were temporarily shut down due to worldwide oversupply of TiO 2 .
In addition to these multinational producers, we also compete against numerous other producers, including producers in China, who, although generally having
smaller facilities, have significantly expanded their TiO 2 production capacity over the last decade. Most Chinese producers utilize the sulfate process to produce a
product line that, while cost competitive in China, is suitable principally for lower-end and limited mid-range applications. The quality differential and logistic
considerations has limited the global export of TiO 2 produced in China to approximately 600 thousand metric tons in 2015, a decline of 3% from 2014. TZMI, an
independent industry consultant, indicated that environmental factors and weak prices and margins contributed to the idling of capacity in China, some of which is
likely to be permanent. The net permanent capacity reduction in China is estimated to be approximately 30,000 metric tons in 2015. In 2015, two of the largest
Chinese domestic producers, Henan Billions and Lomon, announced their intention to merge. This transaction, currently under regulatory review, is believed to be
a potential trend in China toward additional consolidation and more efficient production facilities.
Raw Materials
The primary raw materials used in the manufacture of TiO 2 are titanium-bearing ores, chlorine, calcined petroleum coke and energy. We source titanium-bearing
ores from a number of suppliers around the globe, who are primarily located in Australia, South Africa, Canada and Mozambique. To ensure proper supply volume
and to minimize pricing volatility, we generally enter into contracts in which volume is requirement-based and pricing is determined by a range of mechanisms
structured to help us achieve competitive pricing relative to the market. We typically enter into a combination of long- and mid-term supply contracts and source
our raw material from multiple suppliers across different regions and from multiple sites per supplier. Furthermore, we typically purchase multiple grades of ore
from each supplier to limit our exposure to any single supplier for any single grade of ore in any given time period. Historically, we have not experienced any
problems renewing such contracts for raw materials or securing our supply of titanium-bearing ores.
We play an active role in ore source development around the globe, especially for those ores which can only be used by us, given the capability of our unique
process technology. Supply chain flexibility allows for ore purchase and use optimization to manage short-term demand fluctuations and for long-term competitive
advantage. Our process technology and ability to use lower grade ilmenite ore gives us the flexibility to alter our ore mix to the lowest cost configuration based on
sales, demand and projected ore pricing. Lastly, we have taken steps to optimize routes for distribution and increase storage capacity at our production facilities.
Transporting chlorine, one of our primary raw materials, can be costly. To reduce our exposure to this expense, we have a chlor-alkali production facility run by a
third party that is co-located at our Johnsonville,Tennessee site, reducing our need to transport chlorine. Calcined petroleum coke is an important raw material
input to our process. We source calcined petroleum coke from well-established suppliers in North America and China, typically under contracts that run multiple
years to facilitate material and logistics planning through the supply chain. Distribution efficiency is enhanced through use of bulk ocean, barge and rail
transportation modes.
Energy is another key input cost into the TiO 2 manufacturing process, representing approximately 10 percent of the production cost. Chemours has access to
natural gas based energy at our U.S. and Mexico TiO 2 production facilities and our Florida minerals plant, supporting advantaged energy costs given the low cost
shale gas in the U.S. We continually evaluate investments to replace aging coal- and oil-based steam supply assets with natural gas at our sites. Natural gas-based
cogeneration of steam and electricity is being extended as part of the major expansion at one of our TiO 2 production facilities.
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Sales, Marketing and Distribution
We sell the majority of our products through a direct sales force. We also utilize third-party sales agents and distributors to expand our reach. TiO 2 represents a
significant raw material cost for our custom ers and as a result, purchasing decisions are often made by our customers’ senior management team. Our sales
organization works to develop and maintain close relationships with key decision makers in our value chain.
In addition, our sales team and technical service team work together to develop relationships with all layers of our customers’ organizations to ensure that we meet
our customers’ commercial and technical requirements. When appropriate, we collaborate closely with customers to solve formulation or application problems by
modifying product characteristics or developing new product grades.
To ensure an efficient distribution, we have a large fleet of railcars, which are predominantly used for outbound distribution of products in the U.S. and Canada. A
dedicated logistics team, along with external partners, continually optimizes the assignment of our transportation equipment to product lines and geographic
regions in order to maximize utilization and maintain an efficient supply chain.
Customers
Globally, we serve approximately 800 customers through our Titanium Technologies segment. In 2015, our ten largest Titanium Technologies customers
accounted for approximately 30 percent of the segment’s sales. No single Titanium Technologies customer represented more than eight percent of our segment
sales in 2015. Our larger customers in the U.S. and Europe are typically served through direct sales and tend to have medium- to long-term contracts with annual
volume requirements and periodic price adjustment mechanisms. We serve our small- and mid-size customers through a combination of our direct sales and
distribution network.
Our direct customers in Titanium Technologies are producers of decorative coatings, automotive and industrial coatings, polyolefin masterbatches,
polyvinylchloride window profiles, engineering polymers, laminate paper, coatings paper and coated paperboard. We focus on developing long-term partnerships
with key market participants in each of these sectors. We also deliver a high level of technical service to satisfy our customers’ specific needs, which helps us
maintain strong customer relationships.
Seasonality
The demand for TiO 2 is subject to seasonality because certain applications, such as decorative coatings, are influenced by weather conditions or holiday seasons.
As a result, our TiO 2 sales volume is typically lowest in the first quarter, highest in the second and third quarters and moderate in the fourth quarter. This pattern
applies to the entire TiO 2 market, but may vary by region, country or application. It can also be altered by economic or other demand cycles.
Fluoroproducts Segment
Segment Overview
Our Fluoroproducts segment is the global leader in providing fluorine-based, advanced material solutions. The segment creates products that have unique
properties such as high temperature resistance, high chemical resistance and unique di-electric properties for applications across a broad array of industries. We are
the global leader in providing fluoroproducts, such as refrigerants and industrial fluoropolymer resins and derivatives. We have a leading position in
hydrofluorocarbon (HFC) refrigerants and are a leader in the development of sustainable technologies like Opteon™, a line of low Global Warming Potential
(GWP) hydrofluoroolefin (HFO) refrigerants and foam expansion agents, which also have a zero ozone depletion footprint. Opteon™ was jointly developed with
Honeywell International, Inc., in response to the European Union's (EU) Mobile Air Conditioning (MAC) Directive. This new patented technology offers similar
functionality to current HFC products but meets or exceeds currently mandated environmental standards. We are the market leader in fluoropolymer resins and
downstream products and coatings, marketed under the well-known Teflon TM brand name. Teflon TM industrial resins are used in high-performance wire and cable
and multiple components in high-tech processing equipment.
We led the industry in the Montreal-Protocol (1987) driven transition from chlorofluorocarbons (CFCs) to the lesser ozone depleting hydrochlorofluorocarbons
(HCFCs), and non-ozone depleting HFCs. In 1988, we committed to cease production of CFCs and started manufacturing non-ozone depleting HFCs in the early
1990s. Driven by new and emerging environmental legislations and standards currently being implemented across the U.S., Europe, Latin America and Japan, we
are now commercializing Opteon™ and we expect increased adoption through 2017. Over the years, regulation has pushed the industry to evolve and respond to
environmental concerns. We have and will continue to invest in research and development to ensure that we remain a leader and
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are able to meet our customers needs as regulations change. We are the market leader in fluoropolymer resins and downstream products and coatings, marketed
under the Teflon TM brand.
The manufacturing of fluoroproducts is complex and involves intermediates that are highly corrosive and hazardous in complex processes. We have an industry-
leading safety culture and apply world-class technical expertise to ensure that our operations are run safely and reliably. These capabilities also enable us to
continuously improve production yields, reduce unplanned downtime and increase our throughput, which in turn improves our overall manufacturing efficiency
and customer responsiveness.
Our capacity, innovative production processes, effective supply chain and sourcing strategies make us highly cost competitive in the fluoroproducts market. We
use local contract manufacturing and joint venture partners in selected countries as a source of regional access and asset-light manufacturing to further enhance the
overall cost position of our Fluoroproducts segment.
A breakdown of the Fluoroproducts segment's 2015 sales by region and product group is shown in the charts below:
We sell fluoroproducts through two product groups: Fluorochemicals and Fluoropolymers. Fluorochemicals products include refrigerants, foam expansion agents,
propellants and fire extinguishants. Fluoropolymers products include various industrial fluoropolymer resins, and serve a wide range of industrial and end-user
applications spanning from wearable electronics to automotive, network cables, pipe lining and gaskets, corrosion resistance, surface protections, non-stick
adhesion and thermal stability, among others. Fluorochemicals' refrigerant sales fluctuate by season as sales in the first half of the year generally are
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slightly higher than sales in the second half of the year; however, shifts in the product portfolio in recent quarters have partially offset this impact.
Industry Overview and Competitors
Our Fluoroproducts segment competes against a broad variety of global manufacturers, including Honeywell, Arkema, Mexichem, Daikin, Solvay and Dyneon, as
well as local Chinese and Indian manufacturers. We have a leadership position in fluorine chemistry and materials science, a broad scope and scale of operations,
market driven application development and deep customer knowledge.
Chemours has global leadership positions in the following fluoroproduct categories as set forth in the table below:
Product Group
Fluorochemicals
Position
Key Applications
Key Competitors
#1 Globally
Refrigeration and Air
Honeywell, Arkema, Mexichem, Dongyue,
conditioning
Juhua
Fluoropolymers
#1 Globally
Diversified industrial
Daikin, 3M, Solvay, Asahi Glass Company,
Fluoroproducts Leadership Positions
applications
Dongyue, Chenguang,
Whitford
Fluoroproducts demand growth is expected to be in line with growth in global GDP. Growth may expected to be higher than GDP in situations where, for
environmental reasons, regulatory drivers constrain the market or drive the market toward lower global warming alternatives. Developed markets represent the
largest fluoroproducts markets today. Middle class growth and the increasing demand for consumer electronics, telecommunications, automobiles, refrigerators, air
conditioners and expanding infrastructure are all key drivers of increased demand for various fluoroproducts.
Raw Materials
The primary raw materials required to support the Fluoroproducts segment are fluorspar, chlorinated organics, chlorinated inorganics, hydrofluoric acid and
vinylidene fluoride. These are available in many countries and not concentrated in any particular region.
Our supply chains are designed for maximum competitiveness through advantaged sourcing of key raw materials. Starting with our sourcing agreements, we use a
mixture of fixed and market-based pricing and are covered by contracts with terms that span from two to ten years, except for purchases for resale from China that
are negotiated on a monthly basis. Most qualified Fluorspar sources have market-based pricing. Although the fluoroproduct industry has historically relied
primarily on fluorspar exports from China, Chemours has diversified its sourcing through multiple geographic regions and suppliers to ensure a stable and cost
competitive supply. Our current supply agreements are generally in effect through 2020.
Sales, Marketing and Distribution
With more than 85 years of innovation and development in fluorine science, our technical, marketing and sales teams around the world have deep expertise in our
products and their end-uses. We work with customers to select the appropriate fluoroproducts to meet their technical performance needs. We sell our products
through direct channels and through resellers. Selling agreements vary by product line and markets served and include both spot pricing arrangements and longer
term contracts with a typical duration of one year.
We maintain a large fleet of railcars, tank trucks and containers to deliver our products and support our supply chain needs. For the portion of the fleet that is
leased, related lease terms are usually staggered, which provides us with a competitive cost position as well as the ability to adjust the size of our fleet in response
to changes in market conditions. A dedicated logistics team, along with external partners, continually optimizes the assignment of our transportation equipment to
product lines and geographic regions in order to maximize utilization and flexibility of the supply chain.
Customers
We serve approximately 4,000 customers and distributors globally and in many instances these commercial relationships have been in place for decades. No single
Fluoroproducts customer represented more than 10 percent of the segment's sales in 2015.
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Seasonality
Seasonality in Fluorochemicals sales is driven by increased demand for residential, commercial and automotive air conditioning in the spring. This demand peaks
in the summer months and declines in the fall and winter. Commercial refrigeration demand is fairly steady throughout the year, but demand is slightly higher
during the summer months. There is no significant seasonality for Fluoropolymers, as demand is relatively consistent throughout the year.
Chemical Solutions Segment
Segment Overview
Our Chemical Solutions segment comprises a diverse portfolio of industrial and specialty chemical businesses primarily operating in the Americas. The Chemical
Solutions segment’s products are used as important raw materials and catalysts for a diverse group of industries including, among others, gold production, oil
refining, agriculture and industrial polymers. We are a leading North American provider of several Chemical Solutions products, including sodium cyanide and
sulfuric acid. Chemical Solutions generates value through the use of market leading manufacturing technology, safety performance and product stewardship, and
differentiated logistics capabilities.
As part of our transformation plan, we announced a strategic review of our Chemical Solutions segment, excluding Cyanides. In November 2015, we announced
the sale of our Aniline facility in Beaumont, Texas to The Dow Chemical Company, subject to customary approvals and closing conditions, which is expected to
be completed in the first quarter of 2016. We also made significant progress on our strategic review of our portfolio, including the announced planned exit of the
Reactive Metals business and decision to retain and improve the cost position of our Methylamines business. The remainder of our Chemical Solutions assets are
still under strategic review, and we expect to conclude the process in 2016.
Chemical Solutions operates at 13 dedicated production facilities, which are primarily concentrated in North America. Chemical Solutions sells products and
solutions through three primary product groups: Cyanides, Sulfur Products, and Performance Chemicals & Intermediates. Performance Chemicals & Intermediates
business includes a number of product lines including Clean & Disinfect chemicals, Aniline, Methylamines, Glycolic Acid, Vazo™ free radical initiators and
Reactive Metals. Our Chemical Solutions segment serves customers in a diverse range of end markets that we expect to generally grow in line with growth in
global GDP.
A breakdown of Chemical Solutions’ 2015 sales by region and primary product groups is shown in the charts below.
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We sell products through three primary product groups. The Cyanides product group includes sodium cyanide, hydrogen cyanide and potassium cyanide. We are
the market leader in solid sodium cyanide production in the Americas, which is used primarily by the mining industry for gold and silver production. The U.S.-
based Sulfur Products group is a leading producer of both non-fuming sulfuric acid products and higher value sulfur derivative products (HVSDs) such as oleum,
sulfur trioxide and chlorosulfonic acid. This product group also provides spent acid regeneration and sulfur gas recovery services to the oil refining industry, where
our merchant regeneration capacity is ranked #1 and #2 in the U.S. Northeast and Gulf Coast regions, respectively. In the Performance Chemicals and
Intermediates product group, we manufacture a wide variety of chemicals used in many different applications such as water treatment, cleaning (household,
institutional and industrial), agricultural chemicals, textiles and electronics.
Industry Overview and Competitors
The industrial and specialty chemicals produced by our Chemical Solutions segment are important raw materials for a wide range of industries and end markets.
We hold a long standing reputation for high quality and the safe handling of hazardous products such as sodium cyanide and sulfuric acid. We believe that we have
leading cost positions in cyanides, sulfur products and our clean and disinfect products. Our competitive cost positions in these products are the result of our
process technology, manufacturing scale, efficient supply chain and proximity to large customers. Our Chemical Solutions segment also holds, and occasionally
licenses, what we believe to be the leading process technologies for the production of hydrogen and sodium cyanide, which are used in industrial polymers and in
gold production.
Chemours has global leadership positions in the following product categories:
Chemical Solutions Leadership Positions
Product (Product Group)
Position
Key Applications
Key Competitors
Cyanides
#1 in Solid Sodium Cyanide in the Americas
Gold Production
Sulfur Products
#1 in Spent Acid Regeneration in U.S.
Northeast Region
Refining
Orica, Cyanco,
Samsung
Ecoservices,
Chemtrade
#2 in Spent Acid Regeneration in U.S. Gulf
Coast Region
Performance Chemicals &
Intermediates
Leading positions in U.S. in number of
products, e.g.:
Chlorine Dioxide
Glycolic Acid
Oxone TM
Water treatment
Evoqua, OxyChem
Household, institutional and
industrial cleaning, personal care
Recreational water treatment, dentures
cleaning
CABB, Taicang
Xinmao
United Initiators
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Raw Materials
Key raw materials for Chemical Solutions include ammonia, methanol, sulfur, natural gas, formaldehyde, hydrogen and caustic soda. We source raw materials
from global and regional suppliers where possible and maintain multiple supplier relationships to protect against supply disruptions and potential price increases.
To further mitigate the risk of raw material availability and cost fluctuation, Chemical Solutions has also taken steps to optimize routes for distribution, increase
the storage capacity at our production facilities, lock in long-term contracts with key suppliers and increase the number of customer contracts with raw material
price pass-through terms. We do not believe that the loss of any particular supplier would be material to our business.
Sales, Marketing and Distribution
Our technical, marketing and sales teams around the world have deep expertise with our products and their end markets. We predominantly sell directly to
customers, although we also use a network of distributors for specific product lines and geographies. Sales may take place through either spot transactions or via
long-term contracts.
Most of Chemical Solutions’ raw materials and products can be delivered by efficient bulk transportation. As such, we maintain a large fleet of railcars, tank trucks
and containers to support our supply chain needs. For the portion of the fleet that is leased, related lease terms are usually staggered, which provides us with a
competitive cost position as well as the ability to adjust the size of our container fleet in response to changes in market conditions. A dedicated logistics team,
along with external partners, continually optimizes the assignment of our transportation equipment to product lines and geographic regions in order to
maximize utilization and flexibility of the supply chain.
The strategic placement of our production facilities in locations designed to serve our key customer base gives us robust distribution capabilities.
Customers
Our Chemical Solutions segment focuses on developing long-term partnerships with key market participants. Many of our commercial and industrial relationships
have been in place for decades and are based on our proven value proposition of safely and reliably supplying our customers with the materials needed for their
operations. Our reputation and long-term track record is a key competitive advantage as several of the products’ end users demand the highest level of excellence
in safe manufacturing, distribution, handling and storage. Chemical Solutions has a Department of Transportation Special Permits and Approvals in place for
distribution of various materials associated with each of our business lines as required. Our Chemical Solutions segment serves over a thousand customers globally.
The largest Chemical Solutions customer represented approximately 10 percent of segment sales in 2015.
Seasonality
Our sales are subject to minimal seasonality. Our Sulfur Products business is influenced by seasonal fluctuations because in the summer months we typically sell a
higher volume of acid due to oil refinery customers operating at higher capacities.
Intellectual Property
Intellectual property, including trade secrets, certain patents, trademarks, copyrights, know-how and other proprietary rights, is a critical part of maintaining our
technology leadership and competitive edge. Our business strategy is to file patent and trademark applications globally for proprietary new product and application
development technologies. We hold many patents, particularly in our Fluoroproducts segment, as described herein. These patents, including various patents that
expire during the period of 2016 to 2034, in the aggregate, are believed to be of material importance to our business. However, we believe that no single patent (or
related group of patents) is material in relation to our business as a whole. In addition, particularly in our Titanium Technologies segment, we hold significant
intellectual property in the form of trade secrets and, while we believe that no single trade secret is material in relation to our combined business as a whole, we
believe they are material in the aggregate. Unlike patents, trade secrets do not have a predetermined validity period, but are valid indefinitely, so long as their
secrecy is maintained. We work actively on a global basis to create, protect and enforce our intellectual property rights. The protection afforded by these patents
and trademarks varies based on country, scope of individual patent and trademark coverage, as well as the availability of legal remedies in each country. Although
certain proprietary intellectual property rights are important to the success of our company, we do not believe that we are materially dependent on any particular
patent or trademark. We believe that securing our intellectual property is critical to maintaining our technology leadership and our competitive position, especially
with respect to new technologies or the extensions of existing technologies. Our proprietary process technology is also a source of incremental income through
licensing arrangements.
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Our Titanium Technologies segment in particular relies upon unpatented proprietary knowledge and continuing technological innovation and other trade secrets to
develop and maintain our competitive position in this space. Our proprietary chloride production process is an important part of our technology and our business
could be harmed if our trade secrets are not maintained in confidence. In our Titanium Technologies intellectual property portfolio, we consider our trademark Ti-
Pure TM to be a valuable asset and have registered this trademark in a number of countries.
Our Fluoroproducts segment is the technology leader in the markets in which it participates. We have one of the largest patent portfolios in the fluorine derivatives
industry. In our Fluoroproducts intellectual property portfolio, we consider our Freon TM , Opteon TM , Teflon TM , Viton TM and Krytox TM trademarks to be
valuable assets.
Our Chemical Solutions segment is a manufacturing and application development technology leader in a majority of the markets in which it participates. In our
Chemical Solutions intellectual property portfolio, we consider our Virkon TM and Oxone TM trademarks to be valuable assets. Trade secrets are one of the key
elements of our intellectual property security in Chemical Solutions as most of the segment’s manufacturing and application development technologies are no
longer under patent coverage.
At separation, certain of our subsidiaries entered into an intellectual property cross-license agreement with DuPont, pursuant to which (i) DuPont has agreed to
license to Chemours certain patents, know-how and technical information owned by DuPont or its affiliates and necessary or useful in Chemours’ business, and
(ii) Chemours has agreed to license to DuPont certain patents owned by Chemours or its affiliates and necessary or useful in DuPont’s business. In most
circumstances, the licenses are perpetual, irrevocable, sublicenseable (in connection with the party’s business), assignable (in connection with a sale of the
applicable portion of a party’s business or assets, subject to certain exceptions) worldwide licenses in connection with the current operation of the businesses and,
with respect to specified products and fields of use, future operation of such businesses, subject to certain limitations with respect to specified products and fields
of use.
Research and Development
We perform research and development activities in all of our segments with the majority of our efforts focused in the Fluoroproducts segment. The Fluoroproducts
segment efforts center on developing new sustainable fluorochemicals and new applications and formulations for fluoropolymers that meet customers’ technical
requirements. In Titanium Technologies and Chemical Solutions, our efforts are focused on process technology to reduce cost and maintain safety and stewardship
standards. The table below sets forth the last three years of research and development expense by segment:
(Dollars
in
millions)
Titanium Technologies
Fluoroproducts
Chemical Solutions
Total
Backlog
Year Ended December 31,
2015
2014
2013
$
$
33 $
50
14
97 $
47 $
79
17
143 $
48
93
23
164
In general, the Company does not manufacture its products against a backlog of orders and does not consider backlog to be a significant indicator of the level of
future sales activity. Production and inventory levels are based on the level of incoming orders as well as projections of future demand. Therefore, the Company
believes that backlog information is not material to understanding its overall business and should not be considered a reliable indicator of the Company's ability to
achieve any particular level of revenue or financial performance.
Environmental Matters
Information related to environmental matters is included in several areas of this report: (1) Environmental Proceedings, (2) Risk Factors, (3) Management's
Discussion and Analysis of Financial Condition and Results of Operations and (4) Notes 3 and 19 to the Consolidated Financial Statements.
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Available Information
Chemours is subject to the reporting requirements under the Securities Exchange Act of 1934. Consequently, the Company is required to file reports and
information with the Securities and Exchange Commission (SEC), including reports on the following forms: annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934.
The public may read and copy any materials the Company files with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549.
The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site
at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
The Company's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are also accessible on
the Company's website at http://www.chemours.com by clicking on the section labeled "Investor Relations", then on "Filings & Reports" and then on "SEC
Filings." These reports are made available, without charge, as soon as is reasonably practicable after the Company files or furnishes them electronically with the
SEC.
Employees
We have approximately 8,100 employees, approximately 24% of whom are represented by unions or works councils. Management believes that its relations with
its employees and labor organizations are good. There have been no strikes or work stoppages in any of our locations in recent history.
Item 1A. RISK FACTORS
The
company's
operations
could
be
affected
by
various
risks,
many
of
which
are
beyond
our
control.
Based
on
current
information,
we
believe
that
the
following
identifies
the
most
significant
risk
factors
that
could
affect
our
business,
results
of
operations
or
financial
condition.
Past
financial
performance
may
not
be
a
reliable
indicator
of
future
performance
and
historical
trends
should
not
be
used
to
anticipate
results
or
trends
in
future
periods.
See
“Cautionary
Statement
Concerning
Forward-Looking
Statements”
for
more
details.
Risks Related to Our Business
Conditions in the global economy and global capital markets may adversely affect our results of operations, financial condition, and cash flows.
Our business and operating results may in the future be adversely affected by global economic conditions, including instability in credit markets, declining
consumer and business confidence, fluctuating commodity prices and interest rates, volatile exchange rates, and other challenges such as the changing financial
regulatory environment that could affect the global economy. Our customers may experience deterioration of their businesses, cash flow shortages, and difficulty
obtaining financing. As a result, existing or potential customers may delay or cancel plans to purchase products and may not be able to fulfill their obligations to us
in a timely fashion. Further, suppliers could experience similar conditions, which could impact their ability to supply materials or otherwise fulfill their obligations
to us. Because we have significant international operations, there are a large number of currency transactions that result from international sales, purchases,
investments and borrowings. Also, our effective tax rate may fluctuate because of variability in geographic mix of earnings, changes in statutory rates, and taxes
associated with repatriation of non-U.S. earnings. Future weakness in the global economy and failure to manage these risks could adversely affect our results of
operations, financial condition and cash flows in future periods.
Market conditions, as well as global and regional economic downturns that adversely affect the demand for the end-use products that contain TiO 2 ,
fluoroproducts or our other products, could adversely affect the profitability of our operations and the prices at which we can sell our products, negatively
impacting our financial results.
Our revenue and profitability is largely dependent on the TiO 2 industry and the industries that are end users of our fluoroproducts. TiO 2 and our fluoroproducts,
such as refrigerants and resins, are used in many “quality of life” products for which demand historically has been linked to global, regional and local GDP and
discretionary spending, which can be negatively impacted by regional and world events or economic conditions. Such events are likely to cause a decrease in
demand for our products and, as a result, may
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have an adverse effect on our results of operations and financial condition. The future profitability of our operations, and cash flows generated by those operations,
will also be affected by the available supply of our products in the market.
Additionally, our profitability may be affected by the market for, and use of, by-products generated as part of our manufacturing processes. A significant decrease
in the demand for such products could adversely impact our operations by increasing the cost of our products and reducing our profit margins.
If we are unable to execute our cost reduction plans successfully, our total operating costs may be greater than expected, which may adversely affect our
profitability.
We have announced a transformation plan that includes a number of cost saving measures. We have implemented a number of these measures and have realized a
portion of the anticipated benefits. While we continue to search for opportunities to reduce our costs and expenses to improve operating profitability without
jeopardizing the quality of our products or the effectiveness of our operations, our success in achieving targeted cost and expense reductions depends upon a
number of factors such as timing of execution, market condition, and regulatory and local requirements and approvals. If we do not successfully execute on our
cost reduction initiatives or if we experience delays in completing the implementation of these initiatives, our results of operations or financial condition could be
adversely affected.
Our reported results could be adversely affected by currency exchange rates and currency devaluation could impair our competitiveness.
Due to our international operations, we transact in many foreign currencies, including but not limited to the Euro, Brazilian real, Mexican peso and Japanese yen.
As a result, we are subject to the effects of changes in foreign currency exchange rates. During times of a strengthening U.S. dollar, our reported net revenues and
operating income will be reduced because the local currency will be translated into fewer U.S. dollars. During periods of local economic crisis, local currencies
may be devalued significantly against the U.S. dollar, potentially reducing our margin. For example, unfavorable movement in the Euro has negatively impacted
our results of operations since the second half of 2014, and the further decline of the Euro could affect future periods. From time to time, Chemours enters into
forward exchange contracts and other financial contracts in an attempt to mitigate the impact of currency rate fluctuations. Currently, Chemours does not hedge on
a transactional basis. There can be no assurance that any hedging action will lessen the adverse impact of a variation in currency rates. Also, actions to recover
margins may result in lower volume and a weaker competitive position, which may have an adverse effect on our profitability. For example, in Titanium
Technologies, a substantial portion of our manufacturing is located in the U.S. and Mexico, while our TiO 2 is delivered to customers around the world.
Furthermore, our ore cost is principally denominated in U.S. dollars. Accordingly, in periods when the U.S. dollar or Mexican Peso strengthen against other local
currencies such as the Euro, our costs are higher relative to our competitors who operate largely outside of the United States, and the benefits we realize from
having lower costs associated with our manufacturing process are reduced, impacting our profitability.
The markets for many of our products have seasonally affected sales patterns.
The demand for TiO 2 , certain of our fluoroproducts and certain of our other products during a given year is subject to seasonal fluctuations. As a result of seasonal
fluctuations, our operating cash flow may be negatively impacted due to demand fluctuations. In particular, because TiO 2 is widely used in coatings, demand is
higher in the painting seasons of spring and summer. Because certain fluoroproducts are used in refrigerants, such products are in higher demand in the spring and
summer in the Northern Hemisphere. We may be adversely affected by anticipated or unanticipated changes in regional weather conditions. For example, poor
weather conditions in a region can lead to an abbreviated painting season, which can depress consumer sales of paint products that use TiO 2 , which could have a
negative effect on our cash position.
Our results of operations could be adversely affected by litigation and other commitments and contingencies.
We face risks arising from various unasserted and asserted litigation matters, including, but not limited to, product liability, patent infringement, antitrust claims,
and claims for third party property damage or personal injury stemming from alleged environmental or other torts. We have noted a nationwide trend in purported
class actions against chemical manufacturers generally seeking relief such as medical monitoring, property damages, off-site remediation and punitive damages
arising from alleged environmental or other torts without claiming present personal injuries. We also have noted a trend in public and private nuisance suits being
filed on behalf of states, counties, cities and utilities alleging harm to the general public. Various factors or developments can lead to changes in current estimates
of liabilities such as a final adverse judgment, significant settlement or changes in applicable law. A future adverse ruling or unfavorable development could result
in future charges that could have a material adverse effect on us. An adverse outcome in any one or more of these matters could be material to our financial results
and could adversely impact the value of any of our brands that are associated with any such matters.
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In the ordinary course of business, we may make certain commitments, including representations, warranties and indemnities relating to current and past
operations, including those related to divested businesses, and issue guarantees of third party obligations. Additionally, we are required to indemnify DuPont for
uncapped amounts with regard to liabilities allocated to, or assumed by us under each of the separation agreement, the employee matters agreement, the tax matters
agreement and the intellectual property cross-license agreement that were executed prior to the spin-off. These indemnification obligations to date have included
defense costs associated with certain litigation matters as well as certain damages awards, settlements, and penalties. As we are required to make payments, such
payments could be significant and could exceed the amounts we have accrued with respect thereto, adversely affecting our results of operations. In addition, in the
event that DuPont seeks indemnification for adverse trial rulings or outcomes, these indemnification claims could materially adversely affect our financial
condition. Disputes between Chemours and DuPont many also arise with respect to indemnification matters including disputes based on matters of law or contract
interpretation. If and to the extent these disputes arise, they could materially adversely affect us.
As a result of our current and past operations, including operations related to divested businesses and our discontinued operations, we could incur significant
environmental liabilities.
We are subject to various laws and regulations around the world governing the environment, including the discharge of pollutants and the management and
disposal of hazardous substances. As a result of our operations, including the operations of divested businesses and certain discontinued operations, we could incur
substantial costs, including remediation and restoration costs. The costs of complying with complex environmental laws and regulations, as well as internal
voluntary programs, are significant and will continue to be significant for the foreseeable future. This includes costs we expect to continue to incur for
environmental investigation and remediation activities at a number of our current or former sites and third-party disposal locations. However, the ultimate costs
under environmental laws and the timing of these costs are difficult to accurately predict. While we establish accruals in accordance with generally accepted
accounting principles, the ultimate actual costs and liabilities may vary from the accruals because the estimates on which the accruals are based depend on a
number of factors (many of which are outside of our control), including the nature of the matter and any associated third-party claims, the complexity of the site,
site geology, the nature and extent of contamination, the type of remedy, the outcome of discussions with regulatory agencies and other Potentially Responsible
Parties (PRPs) at multi-party sites and the number and financial viability of other PRPs. See "Environmental Matters" within Item 7 - Management's Discussion
and Analysis (MD&A) of Financial Condition and Results of Operations for further information and Note 19 to the Consolidated Financial Statements included
elsewhere in this Annual Report.
As we conduct a substantial percentage of our operations internationally, and may increase our presence in developing and other international markets,
unforeseen or adverse changes in government policies, laws or certain geopolitical conditions and activities could adversely affect our financial results.
We have 35 production facilities, with operations primarily located in the U.S., Canada, Mexico, Brazil, the Netherlands, Belgium, China, Japan, Taiwan,
Switzerland, the United Kingdom, and France. Sales to customers outside the U.S. constituted about 57% of our 2015 revenue. We anticipate that international
production and sales, including those activities in developing markets, will be a continued and increasingly important part of our business. For example, we use
local contract manufacturing and joint venture partners in Asia and Latin America, more specifically China, Vietnam and Mexico, as sources of regional access,
asset-light production (where possible) and sourcing partners that decrease the cost of materials and production for our Fluoroproducts segment. However, our
ability to achieve these improved cost positions is dependent on our ongoing relationships in the region, including our ability to source materials in those relevant
countries and those relationships may be materially affected by geopolitical factors and government actions, such as the enactment of import/export restrictions or
other trade limitations. To the extent our regional production or sourcing arrangements in Asia and Latin America are disrupted, that disruption could have an
adverse effect on our costs and materially impact our financial results. Sales from developing markets represented 25% percent of our 2015 revenue and our
growth plans include focusing on our presence in developing markets, specifically markets in Asia, Eastern Europe and Latin America. While we believe these
developing markets offer prospects for business growth, we also anticipate that such markets could be subject to more volatile economic, political and market
conditions than other market areas in which we operate and, should changes in trade, monetary and fiscal policies, laws and regulations, or other activities of U.S.
and non-U.S. governments, agencies and similar organizations have a negative effect on our sales to non-U.S. markets, our financial results could be affected
adversely. In this regard, factors that could affect our sales, include, but are not limited to, changes in a country’s or region’s economic or political conditions, trade
or other economic-based regulations, environmental regulations, including climate change-based regulations or legislation and regulations relating to the transport
or shipment of hazardous materials, and policies affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection
of intellectual property rights in some countries, changes in the regulatory or legal environment, restrictions on currency exchange activities, burdensome taxes and
tariffs and other trade barriers or policies. The certainty, timing and enforcement of these regulations is less predictable in developing countries, adding a further
element of uncertainty to business decisions including those related to long-term capital investment. For example, demand growth in Chemours HFO based
products and blends is expected to be driven by country-
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specific legislation phasing down the usage of comparative HFC based products, based on compliance with and implementation of the Montreal Protocol or similar
environmental regulations governing the use of HCFCs, HFCs and HFOs. While a number of countries in Asia and Eastern Europe in which we sell or market our
products have enacted legislation or otherwise adopted programs to phase-down the usage of HFC refrigerants, the enforcement of such legislation and impact of
such programs is uncertain and any delays in such implementation and enforcement could have an adverse effect on our sales and financial results. In Titanium
Technologies, we believe that some local producers in China may be required to incur additional capital expenditures to meet recently enacted environmental
standards for pollution abatement, which could exert pressure on competing regional producers in China utilizing the sulfate process.
Failure to maintain effective internal controls could adversely affect our ability to meet our reporting requirements.
The Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") requires, among other things, that we maintain effective internal control over financial reporting and
disclosure controls and procedures. One key aspect of the Sarbanes-Oxley Act is that we must perform system and process evaluation and testing of our internal
control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control
over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, with auditor attestation of the effectiveness of our internal controls, beginning with
our annual report on Form 10-K for the fiscal year ending December 31, 2016. If we are not able to comply with the requirements of Section 404 in a timely
manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be
material weaknesses, the market price of our common shares could decline and we could be subject to penalties or investigations by the NYSE, the SEC or other
regulatory authorities, which would require additional financial and management resources.
Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports, and to effectively prevent fraud. Internal
controls over financial reporting may not prevent or detect misstatements because of inherent limitations, including the possibility of human error, the
circumvention or overriding of controls, or fraud. Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation
and fair presentation of financial statements. If we cannot provide reasonable assurance with respect to our financial reports and effectively prevent fraud, our
operating results could be harmed. In addition, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are
subject to the risk that the control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate. If we fail to maintain the effectiveness of our internal controls, including any failure to implement required new or improved controls, or if we
experience difficulties in their implementation, our business and operating results could be harmed, we could fail to meet our reporting obligations, and there could
be a material adverse effect on our stock price.
The ongoing process of implementing internal controls in connection with our operation as a stand-alone company requires significant attention from management
and we cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future.
Difficulties encountered in their implementation could harm our results of operations or cause us to fail to meet our reporting obligations. If we fail to obtain the
quality of administrative services necessary to operate effectively or incur greater costs in obtaining these services, our profitability, financial condition and results
of operations may be materially and adversely affected.
Effects of our raw materials contracts, including our inability to renew such contracts, could have a significant impact on our earnings.
When possible we have purchased, and we plan to continue to purchase, raw materials, including titanium bearing ores and fluorospar, through negotiated medium-
or long-term contracts to minimize the impact of price fluctuations. To the extent that we have been able to achieve favorable pricing in our existing negotiated
long-term contracts, we may not be able to renew such contracts at the current prices, or at all, and this may adversely impact our cash flow from operations.
However, to the extent that the prices of raw materials that we utilize significantly decline, we may be bound by the terms of our existing long-term contracts and
obligated to purchase such raw materials at higher prices as compared to other market participants.
Price fluctuations in energy and raw materials could have a significant impact on our ability to sustain and grow earnings.
Our manufacturing processes consume significant amounts of energy and raw materials, the costs of which are subject to worldwide supply and demand as well as
other factors beyond our control. Variations in the cost of energy, which primarily reflect market prices for oil and natural gas, and for raw materials may
significantly affect our operating results from period to period. Additionally, consolidation in the industries providing our raw materials may have an impact on the
cost and availability of such materials. To the extent we do not have fixed price contracts with respect to specific raw materials, we have no control over the costs
of raw materials and such costs may fluctuate widely for a variety of reasons, including changes in availability, major capacity additions
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or reductions, or significant facility operating problems. These fluctuations could negatively affect our operating margins and our profitability.
We attempt to offset the effects of higher energy and raw material costs through selling price increases, productivity improvements and cost reduction programs.
However, the outcome of these efforts is largely determined by existing competitive and economic conditions, and may be subject to a time delay between the
increase in our raw materials costs and our ability to increase prices, which could vary significantly depending on the market served. If we are not able to fully
offset the effects of higher energy or raw material costs, it could have a material adverse effect on our financial results.
Hazards associated with chemical manufacturing, storage and transportation could adversely affect our results of operations.
There are hazards associated with chemical manufacturing and the related storage and transportation of raw materials, products and wastes. These hazards could
lead to an interruption or suspension of operations and have an adverse effect on the productivity and profitability of a particular manufacturing facility or on us as
a whole. While we endeavor to provide adequate protection for the safe handling of these materials, issues could be created by various events, including natural
disasters, severe weather events, acts of sabotage and performance by third parties, and as a result we could face the following potential hazards:
•
piping and storage tank leaks and ruptures;
• mechanical failure;
•
•
employee exposure to hazardous substances; and
chemical spills and other discharges or releases of toxic or hazardous substances or gases.
These hazards may cause personal injury and loss of life, damage to property and contamination of the environment, which could lead to government fines, work
stoppage injunctions, lawsuits by injured persons, damage to our public reputation and brand, and diminished product acceptance. If such actions are determined
adversely to us or there is an associated economic impact to our business, we may have inadequate insurance or cash flow to offset any associated costs. Such
outcomes could adversely affect our financial condition and results of operations.
We are subject to extensive environmental, health and safety laws and regulations that may result in unanticipated loss or liability, which could reduce our
profitability.
Our operations and production facilities are subject to extensive environmental and health and safety laws and regulations at national, international and local levels
in numerous jurisdictions relating to pollution, protection of the environment, climate change, transporting and storing raw materials and finished products and
storing and disposing of hazardous wastes. Such laws include, in the U.S., the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA, often referred to as Superfund), the Resource Conservation and Recovery Act (RCRA) and similar state and global laws for management and
remediation of hazardous materials, the Clean Air Act (CAA) and the Clean Water Act, for protection of air and water resources, the Toxic Substances Control Act
(TSCA), and in the EU, the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), for regulation of chemicals in commerce and reporting
of potential known adverse effects and numerous local, state and federal laws and regulations governing materials transport and packaging. If we are found to be in
violation of these laws or regulations, we may incur substantial costs, including fines, damages, criminal or civil sanctions and remediation costs, or experience
interruptions in our operations. We also may be subject to changes in our operations and production based on increased regulation or other changes to, or
restrictions imposed by, any such additional regulations. In addition, the manner in which adopted regulations (including environmental regulations) are ultimately
implemented may affect our products and results of operations. In the event of a catastrophic incident involving any of the raw materials we use or chemicals we
produce, we could incur material costs as a result of addressing the consequences of such event and future reputational costs associated with any such event.
There is also a risk that one or more of our key raw materials or one or more of our products may be found to have, or be characterized as having, a toxicological or
health-related impact on the environment or on our customers or employees or unregulated emissions, which could potentially result in us incurring liability in
connection with such characterization and the associated effects of any toxicological or health-related impact. If such a discovery or characterization occurs, we
may incur increased costs in order to comply with new regulatory requirements or the relevant materials or products, including products of our customers
incorporating our materials or products, may be recalled or banned. Changes in laws and regulations, or their interpretation, and our customers’ perception of such
changes or interpretations may also affect the marketability of certain of our products.
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The businesses in which we compete are highly competitive. This competition may adversely affect our results of operations and operating cash flows.
Each of the businesses in which we operate is highly competitive. Competition in the performance chemicals industry is based on a number of factors such as price,
product quality and service. We face significant competition from major international and regional competitors. Additionally, our Titanium Technologies business
competes with numerous regional producers, including producers in China, which have expanded their readily available production capacity during the previous
five years. Additionally, the risk of substitution of Chinese producers by our customers could increase as they expand their use of chloride production technology.
Our results of operations and financial condition could be seriously impacted by business disruptions and security breaches, including cybersecurity incidents.
Business and/or supply chain disruptions, plant downtime and/or power outages and information technology system and/or network disruptions, regardless of cause
including acts of sabotage, employee error or other actions, geo-political activity, weather events and natural disasters could seriously harm our operations as well
as the operations of our customers and suppliers. Failure to effectively prevent, detect and recover from security breaches, including attacks on information
technology and infrastructure by hackers, viruses, breaches due to employee error or actions or other disruptions could result in misuse of our assets, business
disruptions, loss of property including trade secrets and confidential business information, legal claims or proceedings, reporting errors, processing inefficiencies,
negative media attention, loss of sales and interference with regulatory compliance. Like most major corporations, we have been and expect to be the target of
industrial espionage, including cyber-attacks, from time to time. We have determined that these attacks have resulted, and could result in the future, in
unauthorized parties gaining access to certain confidential business information, and have included the obtaining of trade secrets and proprietary information
related to the chloride manufacturing process for TiO 2 by third parties. Although we do not believe that we have experienced any material losses to date related to
these breaches, there can be no assurance that we will not suffer any such losses in the future. We plan to actively manage the risks within our control that could
lead to business disruptions and security breaches. As these threats continue to evolve, particularly around cybersecurity, we may be required to expend significant
resources to enhance our control environment, processes, practices and other protective measures. Despite these efforts, such events could materially adversely
affect our business, financial condition or results of operations.
If our intellectual property were compromised or copied by competitors, or if our competitors were to develop similar or superior intellectual property or
technology, our results of operations could be negatively affected.
Intellectual property rights, including patents, trade secrets, confidential information, trademarks, tradenames and trade dress are important to our business. We
endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced or used and in jurisdictions into which our products are
imported. Our success depends to a significant degree upon our ability to protect and preserve our intellectual property rights. However, we may be unable to
obtain protection for our intellectual property in key jurisdictions. Although we own and have applied for numerous patents and trademarks throughout the world,
we may have to rely on judicial enforcement of our patents and other proprietary rights. Our patents and other intellectual property rights may be challenged,
invalidated, circumvented, and rendered unenforceable or otherwise compromised. A failure to protect, defend or enforce our intellectual property could have an
adverse effect on our financial condition and results of operations. Similarly, third parties may assert claims against us and our customers and distributors alleging
our products infringe upon third party intellectual property rights.
We also rely materially upon unpatented proprietary technology, know-how and other trade secrets to maintain our competitive position. While we maintain
policies to enter into confidentiality agreements with our employees and third parties to protect our proprietary expertise and other trade secrets, these agreements
may not be enforceable or, even if legally enforceable, we may not have adequate remedies for breaches of such agreements. We also may not be able to readily
detect breaches of such agreements. The failure of our patents or confidentiality agreements to protect our proprietary technology, know-how or trade secrets could
result in significantly lower revenues, reduced profit margins or loss of market share.
If we must take legal action to protect, defend or enforce our intellectual property rights, any suits or proceedings could result in significant costs and diversion of
resources and management’s attention, and we may not prevail in any such suits or proceedings. A failure to protect, defend or enforce our intellectual property
rights could have an adverse effect on our financial condition and results of operations.
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Restrictions under the intellectual property cross-license agreement could limit our ability to develop and commercialize certain products and/or prosecute,
maintain and enforce certain intellectual property.
We depend to a certain extent on DuPont to prosecute, maintain and enforce certain of the intellectual property licensed under the intellectual property cross-
license agreement. Specifically, DuPont is responsible for filing, prosecuting and maintaining patents that DuPont licenses to us. DuPont also has the first right to
enforce such patents, trade secrets and the know-how licensed to us by DuPont. If DuPont fails to fulfill its obligations or chooses to not enforce the licensed
patents, trade secrets or know-how under the intellectual property cross-license agreement, we may not be able to prevent competitors from making, using and
selling competitive products (unless we are able to effectively exercise our secondary rights to enforce such patents, trade secrets and know-how).
In addition, our restrictions under the intellectual property cross-license agreement could limit our ability to develop and commercialize certain products. For
example, the licenses granted to us under the agreement may not extend to all new products, services and businesses that we may enter in the future. These
limitations and restrictions may make it more difficult, time consuming or expensive for us to develop and commercialize certain new products and services, or
may result in certain of our products or services being later to market than those of our competitors.
If we are unable to innovate and successfully introduce new products, or new technologies or processes reduce the demand for our products or the price at
which we can sell products, our profitability could be adversely affected.
Our industries and the end-use markets into which we sell our products experience periodic technological change and product improvement. Our future growth will
depend on our ability to gauge the direction of commercial and technological progress in key end-use markets and on our ability to fund and successfully develop,
manufacture and market products in such changing end-use markets. We must continue to identify, develop and market innovative products or enhance existing
products on a timely basis to maintain our profit margins and our competitive position. We may be unable to develop new products or technology, either alone or
with third parties, or license intellectual property rights from third parties on a commercially competitive basis. If we fail to keep pace with the evolving
technological innovations in our end-use markets on a competitive basis, including with respect to innovation with regard to the development of alternative uses
for, or application of, products developed that utilize such end-use products, our financial condition and results of operations could be adversely affected. We
cannot predict whether technological innovations will, in the future, result in a lower demand for our products or affect the competitiveness of our business. We
may be required to invest significant resources to adapt to changing technologies, markets, competitive environments and laws and regulations. We cannot
anticipate market acceptance of new products or future products. In addition, we may not achieve our expected benefits associated with new products developed to
meet new laws or regulations if the implementation of such laws or regulations is delayed.
Our customers, prospective customers, suppliers or other companies with whom we conduct business may need assurances that our financial stability is
sufficient to satisfy their requirements for doing or continuing to do business with them.
Some of our customers, prospective customers, suppliers or other companies with whom we conduct business may need assurances that our financial stability is
sufficient to satisfy their requirements for doing or continuing to do business with them, and may require us to provide additional credit support, such as letters of
credit or other financial guarantees. Any failure of parties to be satisfied with our financial stability could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
In connection with our separation, we were required to assume, and indemnify DuPont for, certain liabilities. As we are required to make payments pursuant
to these indemnities to DuPont, we may need to divert cash to meet those obligations and our financial results could be negatively affected. In addition,
DuPont's obligation to indemnify us for certain liabilities may not be sufficient to insure us against the full amount of liabilities for which it will be allocated
responsibility, and DuPont may not be able to satisfy its indemnification obligations in the future.
Pursuant to the separation agreement, the employee matters agreement, the tax matters agreement and the intellectual property cross-license agreement we entered
into with DuPont prior to the spin-off, we were required to assume, and indemnify DuPont for, certain liabilities for uncapped amounts. These indemnification
obligations to date have included, among other items, defense costs associated with certain litigation matters as well as certain damages awards, settlement
amounts and penalties. Payments pursuant to these indemnities may be significant and could negatively impact our business, particularly indemnities relating to
our actions that could impact the tax-free nature of the distribution. In addition, in the event that DuPont seeks indemnification for adverse trial rulings or
outcomes, these indemnification claims could materially adversely affect our financial condition. Disputes between Chemours and Dupont may also arise with
respect to indemnification matters, including disputes based on matter of law or contract interpretation. If and to the extent these disputes arise, they could
materially adversely affect us.
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Third parties could also seek to hold us responsible for any of the liabilities of the DuPont businesses. DuPont has agreed to indemnify us for such liabilities, but
such indemnity from DuPont may not be sufficient to protect us against the full amount of such liabilities, and DuPont may not be able to fully satisfy its
indemnification obligations. Moreover, even if we ultimately succeed in recovering from DuPont any amounts for which we are held liable, we may be temporarily
required to bear these losses ourselves. Each of these risks could negatively affect our business, financial condition, results of operations and cash flows. See Note
19 to the Consolidated Financial Statements for further information.
In connection with our separation, we were required to enter into numerous separation-related and commercial agreements with our former parent company,
DuPont, which may not reflect optimal or commercially beneficial terms to Chemours.
Commercial agreements we entered into with DuPont in connection with the separation were negotiated in the context of the separation while we were still a
wholly-owned subsidiary of DuPont. Accordingly, during the period in which the terms of those agreements were negotiated, we did not have an independent
board of directors or management independent of DuPont. Certain commercial agreements, having long terms and commercially advantageous cancellation and
assignment rights to DuPont, may not include adjustments for changes in industry and market conditions. There is a risk that the pricing and other terms under
these agreements may not be commercially beneficial and may not be able to be renegotiated in the future. The terms relate to, among other things, the allocation
of assets, liabilities, rights and obligations, including the provision of products and services and the sharing and operation of property, manufacturing, office and
laboratory sites, and other commercial rights and obligations between DuPont and us.
Our ability to close or divest businesses and assets under our announced transformation plan and make future strategic decisions regarding our
manufacturing operations may be adversely affected to the extent we are dependent upon consents or cooperation from DuPont under the agreements entered
into between us and DuPont as part of the separation.
Pursuant to the separation agreement, the employee matters agreement, the tax matters agreement and the intellectual property cross-license agreement, and related
agreements entered into prior to separation, we may need to obtain DuPont’s consent, cooperation, services, records or information in order to effect the strategic
divestitures contemplated under our announced transformation plan. Our inability to receive, or delays in receiving, such consents, cooperation, services, records or
information may adversely affect our ability to execute upon our transformation plan or reduce our strategic or operational flexibility.
In addition, we periodically assess our manufacturing operations in order to manufacture and distribute our products in the most efficient manner. Based on our
assessments, we may make strategic decisions regarding our manufacturing operations such as capital improvements to modernize certain units, move
manufacturing or distribution capabilities from one plant or facility to another plant or facility, discontinue manufacturing or distributing certain products or close
or divest all or part of a manufacturing plant or facility, some of which have significant shared services and lease agreements with DuPont. These agreements may
adversely impact our ability to take these strategic decisions regarding out manufacturing operations. Further, if such agreements are terminated or revised, we
would have to assess and potentially adjust our manufacturing operations, the closure or divestiture of all or part of a manufacturing plant or facility that could
result in future charges that could be significant.
Expansion or improvement of our existing facilities may not result in revenue and profitability increases and will be subject to regulatory, environmental,
political, legal and economic risks, which could adversely affect our results of operations and financial condition.
One of the ways we may improve our business is through the expansion or improvement of our existing facilities, such as the current work being done to expand
our Altamira TiO 2 facility and the planned expansion of our Cyanides facility. Construction of additions or modifications to facilities involves numerous
regulatory, environmental, political, legal and economic uncertainties that are beyond our control. Such expansion or improvement projects may also require the
expenditure of significant amounts of capital, and financing may not be available on economically acceptable terms or at all. As a result, these projects may not be
completed on schedule, at the budgeted cost, or at all. Moreover, our revenue may not increase immediately upon the expenditure of funds on a particular project.
As a result, we may not be able to realize our expected investment return, which could adversely affect our results of operations and financial condition.
We are a holding company that is dependent on cash flows from our operating subsidiaries to fund our debt obligations, capital expenditures and ongoing
operations.
All of our operations are conducted and all of our assets are owned by our operating companies, which are our subsidiaries. We intend to continue to conduct our
operations at the operating companies and any future subsidiaries. Consequently, our cash flow and our ability to meet our obligations or make cash distributions
depends upon the cash flow of our operating companies and any future subsidiaries, and the payment of funds by our operating companies and any future
subsidiaries in the form of dividends or
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otherwise. The ability of our operating companies and any future subsidiaries to make any payments to us depends on their earnings, the terms of their
indebtedness, including the terms of any credit facilities, and legal restrictions regarding the transfer of funds.
Our debt is generally the exclusive obligation of The Chemours Company and our guarantor subsidiaries. Because a significant portion of our operations are
conducted by nonguarantor subsidiaries, our cash flow and our ability to service indebtedness, including our ability to pay the interest on our debt when due and
principal of such debt at maturity, are dependent to a large extent upon cash dividends and distributions or other transfers from such nonguarantor subsidiaries. Any
payment of dividends, distributions, loans or advances by our nonguarantor subsidiaries to us could be subject to restrictions on dividends or repatriation of
earnings under applicable local law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which our subsidiaries operate,
and any restrictions imposed by the current and future debt instruments of our nonguarantor subsidiaries. In addition, payments to us by our subsidiaries are
contingent upon our subsidiaries' earnings.
Our subsidiaries are separate legal entities and, except for our guarantor subsidiaries, have no obligation, contingent or otherwise, to pay any amounts due on our
debt or to make any funds available for those amounts, whether by dividends, loans, distributions or other payments, and do not guarantee the payment of interest
on, or principal of, our debt. Any right that we have to receive any assets of any of our subsidiaries that are not guarantors upon the liquidation or reorganization of
any such subsidiary, and the consequent right of holders of notes to realize proceeds from the sale of their assets, will be structurally subordinated to the claims of
that subsidiary's creditors, including trade creditors and holders of debt issued by that subsidiary.
If our intangible assets or other long-lived assets become impaired, we may be required to record a significant charge to earnings.
We have a significant amount of intangible assets and other long-lived assets on our consolidated balance sheet. Under U.S. GAAP, we review our intangible
assets and other long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that may be
considered a change in circumstances, indicating that the carrying value of our intangible assets and other long-lived assets may not be recoverable, include, but are
not limited to, a significant decline in share price and market capitalization, changes in the industries in which we operate, particularly the impact of a downturn in
the global economy, as well as competition or other factors leading to reduction in expected long-term sales or profitability. We may be required to record a
significant noncash charge in our financial statements during the period in which any impairment of our intangible assets and other long-lived assets is determined,
negatively impacting our results of operations.
Differences in views with our joint venture participants may cause our joint ventures not to operate according to their business plans, which may adversely
affect our results of operations.
We currently participate in a number of joint ventures and may enter into additional joint ventures in the future. The nature of a joint venture requires us to share
control with unaffiliated third parties. Differences in views among joint venture participants may result in delayed decisions or failure to agree on major decisions.
If these differences cause the joint ventures to deviate from their business plans or to fail to achieve their desired operating performance, our results of operations
could be adversely affected.
Our failure to comply with the anti-corruption laws of the United States and various international jurisdictions could negatively impact our reputation and
results of operations.
Doing business on a global basis requires us to comply with the laws and regulations of the U.S. government and those of various international and sub-national
jurisdictions, and our failure to successfully comply with these rules and regulations may expose us to liabilities. These laws and regulations apply to companies,
individual directors, officers, employees and agents, and may restrict our operations, trade practices, investment decisions and partnering activities. In particular,
our international operations are subject to U.S. and foreign anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act (the "FCPA"), the
United Kingdom Bribery Act 2010 (the "Bribery Act") as well as anti-corruption laws of the various jurisdictions in which we operate. The FCPA, the Bribery Act
and other laws prohibit us and our officers, directors, employees and agents acting on our behalf from corruptly offering, promising, authorizing or providing
anything of value to foreign officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable
treatment. Our global operations may expose us to the risk of violating, or being accused of violating, the foregoing or other anti-corruption laws. Such violations
could be punishable by criminal fines, imprisonment, civil penalties, disgorgement of profits, injunctions and exclusion from government contracts, as well as
other remedial measures. Investigations of alleged violations can be very expensive, disruptive, and damaging to our reputation. Although we have implemented
anti-corruption policies and procedures since the separation, there can be no guarantee that these policies, procedures, and training will effectively prevent
violations by our employees or representatives in the future. Additionally, we face a risk that our distributors and other business partners may violate the FCPA, the
Bribery Act or similar laws or regulations. Such violations could expose us to FCPA and Bribery Act liability and/or our reputation may potentially be harmed by
their violations and resulting sanctions and fines.
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Risks Related to Our Indebtedness
Our significant indebtedness could adversely affect our financial condition, and we could have difficulty fulfilling our obligations under our indebtedness,
which may have a material adverse effect on us.
As of December 31, 2015, we had approximately $4.0 billion of indebtedness. At December 31, 2015, together with the guarantors, we had approximately $1.5
billion of senior secured indebtedness outstanding, and had an additional $1.0 billion of capacity under the Revolving Credit Facility, all of which was senior
secured indebtedness. In February 2016, we entered into an amendment to our Revolving Credit Facility which reduced its capacity to $750 million. Our
significant level of indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness. The level
of our indebtedness could have other important consequences on our business, including:
• making it more difficult for us to satisfy our obligations with respect to indebtedness;
•
•
•
•
•
•
•
•
increasing our vulnerability to adverse changes in general economic, industry and competitive conditions;
requiring us to dedicate a significant portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of
our cash flow to fund working capital and other general corporate purposes;
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
restricting us from capitalizing on business opportunities;
placing us at a competitive disadvantage compared to our competitors that have less debt;
limiting our ability to borrow additional funds for working capital, acquisitions, debt service requirements, execution of our business strategy or other
general corporate purposes;
limiting our ability to enter into certain commercial arrangements because of concerns of counterparty risks; and
limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors that have less debt.
The occurrence of any one or more of these circumstances could have a material adverse effect on us.
Despite our significant level of indebtedness, we may be able to incur substantially more debt and enter into other transactions which could further exacerbate
the risks to our financial condition described above.
Notwithstanding our significant level of indebtedness, we may be able to incur significant additional indebtedness in the future, including additional secured
indebtedness that would be effectively senior to the notes (including up to $750 million of available capacity under the Revolving Credit Facility pursuant to the
February 2016 amendment). Although the indenture that governs the notes and the credit agreement that governs the Senior Secured Credit Facilities contain
restrictions on our ability to incur additional indebtedness and to enter into certain types of other transactions, these restrictions are subject to a number of
significant qualifications and exceptions. Additional indebtedness incurred in compliance with these restrictions, including secured indebtedness, could be
substantial. These restrictions also do not prevent us from incurring obligations, such as trade payables, that do not constitute indebtedness as defined under our
debt instruments. To the extent such new debt is added to our current debt levels, the substantial leverage risks described in the immediately preceding risk factor
would increase.
We may need additional capital in the future and may not be able to obtain it on favorable terms.
Our industry is capital intensive, and we may require additional capital in the future to finance our growth and development, implement further marketing and sales
activities, fund ongoing research and development activities and meet general working capital needs. Our capital requirements will depend on many factors,
including acceptance of and demand for our products, the extent to which we invest in new technology and research and development projects, and the status and
timing of these developments, as well as general availability of capital from debt and/or equity markets.
However, debt or equity financing may not be available to us on terms we find acceptable, if at all. Also, regardless of the terms of our debt or equity financing,
our agreements and obligations under the tax matters agreement may limit our ability to issue stock. For a more detailed discussion, see risk factor “ We
agreed
to
numerous
restrictions
to
preserve
the
tax-free
treatment
of
the
transactions
in
the
United
States,
which
may
reduce
our
strategic
and
operating
flexibility
.” If we
are unable to raise additional capital when needed, our financial condition could be materially and adversely affected.
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Additionally, our failure to maintain the credit ratings on our debt securities, including the notes, could negatively affect our ability to access capital and could
increase our interest expense on future indebtedness. We expect the credit rating agencies to periodically review our capital structure and the quality and stability
of our earnings. Deterioration in our capital structure or the quality and stability of our earnings could result in a downgrade of the credit ratings on our debt
securities. Any negative rating agency actions could constrain the capital available to us, reduce or eliminate available borrowing to us and could limit our access
to and/or increase the cost of funding our operations. If, as a result, our ability to access capital when needed becomes constrained, our interest costs could
increase, which could have material adverse effect on our results of operations, financial condition and cash flows.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.
Our borrowings under the Senior Secured Credit Facilities are at variable rates and expose us to interest rate risk. As a result, if interest rates increase, our debt
service obligations under the Senior Secured Credit Facilities or other variable rate debt would increase even though the amount borrowed remained the same, and
our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease. As of December 31, 2015, we had
approximately $1.5 billion of our outstanding debt at variable interest rates.
We may be unable to service our indebtedness, including the notes.
Our ability to make scheduled payments on and to refinance our indebtedness, including the notes, depends on and is subject to our financial and operating
performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors (many of which are beyond our
control), including the availability of financing in the international banking and capital markets. We cannot be certain that our business will generate sufficient cash
flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to service our debt, including the notes, to refinance our
debt or to fund our other liquidity needs.
If we are unable to meet our debt service obligations or to fund our other liquidity needs, we will need to restructure or refinance all or a portion of our debt,
including the notes. Failure to successfully restructure or refinance our debt could cause us to default on our debt obligations and would impair our liquidity. Our
ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our
indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations.
Moreover, in the event of a default of our debt service obligations, the holders of the applicable indebtedness, including the notes and the Senior Secured Credit
Facilities, could elect to declare all the funds borrowed to be due and payable, together with accrued and unpaid interest. We cannot be certain that our assets or
cash flows would be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default. First, a default in our debt
service obligations in respect of the notes would result in a cross default under the Senior Secured Credit Facilities. The foregoing would permit the lenders under
the Revolving Credit Facility to terminate their commitments thereunder and cease making further loans, and would allow the lenders under the Senior Secured
Credit Facilities to declare all loans immediately due and payable and to institute foreclosure proceedings against their collateral, which could force us into
bankruptcy or liquidation. Second, any event of default or declaration of acceleration under the Senior Secured Credit Facilities or any other agreements relating to
our outstanding indebtedness under which the total amount of outstanding indebtedness exceeds $100 million could also result in an event of default under the
indenture governing the notes, and any event of default or declaration of acceleration under any other of our outstanding indebtedness may also contain a cross-
default provision. Any such default, event of default or declaration of acceleration could materially and adversely affect our results of operation and financial
condition.
The agreements governing our indebtedness restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.
The agreements governing our indebtedness, including the notes, contain, and the agreements governing future indebtedness and future debt securities may contain,
significant restrictive covenants and, in the case of the Revolving Credit Facility, financial maintenance covenants that will limit our operations, including our
ability to engage in activities that may be in our long-term best interests. These restrictive covenants may limit us, and our restricted subsidiaries, from taking, or
give rights to the holders of our indebtedness in the event of the following actions:
•
•
incurring additional indebtedness and guaranteeing indebtedness;
paying dividends or making other distributions in respect of, or repurchasing or redeeming, our capital stock;
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• making acquisitions or other investments;
•
•
•
•
•
•
•
•
prepaying, redeeming or repurchasing certain indebtedness;
selling or otherwise disposing of assets;
selling stock of our subsidiaries;
incurring liens;
entering into transactions with affiliates;
entering into agreements restricting our subsidiaries’ ability to pay dividends;
entering into transactions that result in a change of control of us; and
consolidating, merging or selling all or substantially all of our assets.
Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of some or all of our
indebtedness, which could lead us to bankruptcy, reorganization or insolvency.
Risks Related to the Separation
We may be unable to achieve some or all of the benefits that we expected to achieve from our separation from DuPont.
As an independent, publicly-traded company, we continue to, among other things, focus our financial and operational resources on our specific business, growth
profile and strategic priorities, design and implement corporate strategies and policies targeted to our operational focus and strategic priorities, guide our processes
and infrastructure to focus on our core strengths, implement and maintain a capital structure designed to meet our specific needs and more effectively respond to
industry dynamics, all of which are benefits we expected to achieve from our separation. However, we may be unable to fully achieve some or all of these benefits.
For example, in order to position ourselves for the separation and distribution, we undertook a series of strategic, structural and process realignment and
restructuring actions within our operations. These actions may not provide the benefits we expected, and could lead to disruption of our operations, loss of, or
inability to recruit, key personnel needed to operate and grow our businesses following the separation and distribution, weakening of our internal standards,
controls or procedures and impairment of our key customer and supplier relationships. If we fail to achieve some or all of the benefits that we expected to achieve
as an independent company, or do not achieve them in the time we expected, our business, financial condition and results of operations could be materially and
adversely affected.
If the distribution, together with certain related transactions, were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then
we could be subject to significant tax and indemnification liability and stockholders receiving our common stock in the distribution could be subject to
significant tax liability.
DuPont received an IRS Ruling from the IRS substantially to the effect that, among other things, the distribution qualified as a tax-free transaction under
Section 355 and Section 368(a)(1)(D) of the Internal Revenue Code (the Code). The tax-free nature of the distribution was conditioned on the continued validity of
the IRS Ruling, as well as on receipt of a tax opinion, in form and substance acceptable to DuPont, substantially to the effect that, among other things, the
distribution would qualify as a tax-free transaction under Section 355 and Section 368(a)(1)(D) of the Code, and certain transactions related to the transfer of assets
and liabilities to us in connection with the separation and distribution would not result in the recognition of any gain or loss to DuPont, us or our stockholders. The
IRS Ruling and the tax opinion relied on certain facts, assumptions, and undertakings, and certain representations from DuPont and us, regarding the past and
future conduct of both respective businesses and other matters, and the tax opinion relies on the IRS Ruling. Notwithstanding the IRS Ruling and the tax opinion,
the IRS could determine that the distribution or such related transactions should be treated as a taxable transaction if it determines that any of these facts,
assumptions, representations, or undertakings were not correct, or that the distribution should be taxable for other reasons, including if the IRS were to disagree
with the conclusions in the tax opinion that are not covered by the IRS Ruling.
If the distribution ultimately was determined to be taxable, then a stockholder of DuPont that received shares of our common stock in the distribution would be
treated as having received a distribution of property in an amount equal to the fair market value of such shares on the distribution date and could incur significant
income tax liabilities. Such distribution would be taxable to such stockholder as a dividend to the extent of DuPont’s current and accumulated earnings and profits.
Any amount that exceeded DuPont’s earnings and profits would be treated first as a non-taxable return of capital to the extent of such stockholder’s tax basis in its
shares of DuPont stock with any remaining amount being taxed as a capital gain. DuPont would recognize a taxable gain in
26
Table of Contents
an amount equal to the excess, if any, of the fair market value of the shares of our common stock held by DuPont on the distribution date over DuPont’s tax basis
in such shares. In addition, if certain related transactions fail to qualify for tax-free treatment under U.S. federal, state and/or local tax law and/or foreign tax law,
we and DuPont could incur significant tax liabilities under U.S. federal, state, local and/or foreign tax law.
Generally, taxes resulting from the failure of the separation and distribution or certain related transactions to qualify for non-recognition treatment under U.S.
federal, state and/or local tax law and/or foreign tax law would be imposed on DuPont or DuPont’s stockholders and, under the tax matters agreement that we
entered into with DuPont prior to the spin-off, DuPont is generally obligated to indemnify us against such taxes to the extent that we may be jointly, severally or
secondarily liable for such taxes. However, under the terms of the tax matters agreement, we are also generally responsible for any taxes imposed on DuPont that
arise from the failure of the distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code or the failure of
such related transactions to qualify for tax-free treatment, to the extent such failure to qualify is attributable to actions, events or transactions relating to our, or our
affiliates’, stock, assets or business, or any breach of our or our affiliates’ representations, covenants or obligations under the tax matters agreement (or any other
agreement we enter into in connection with the separation and distribution), the materials submitted to the IRS or other governmental authorities in connection with
the request for the IRS Ruling or other tax rulings or the representation letter provided to counsel in connection with the tax opinion. Events triggering an
indemnification obligation under the agreement include events occurring after the distribution that cause DuPont to recognize a gain under Section 355(e) of the
Code. Such tax amounts could be significant. To the extent we are responsible for any liability under the tax matters agreement, there could be a material adverse
impact on our business, financial condition, results of operations and cash flows in future reporting periods.
We are subject to continuing contingent tax-related liabilities of DuPont.
There are several significant areas where the liabilities of DuPont may become our obligations. For example, under the Code and the related rules and regulations,
each corporation that was a member of DuPont’s consolidated tax reporting group during any taxable period or portion of any taxable period ending on or before
the effective time of the distribution is jointly and severally liable for the U.S. federal income tax liability of the entire consolidated tax reporting group for such
taxable period. In connection with the separation and distribution, we entered into a tax matters agreement with DuPont that allocates the responsibility for prior
period taxes of DuPont’s consolidated tax reporting group between us and DuPont. If DuPont were unable to pay any prior period taxes for which it is responsible,
however, we could be required to pay the entire amount of such taxes, and such amounts could be significant. Other provisions of federal, state, local, or foreign
law may establish similar liability for other matters, including laws governing tax-qualified pension plans, as well as other contingent liabilities.
We agreed to numerous restrictions to preserve the tax-free treatment of the transactions in the U.S., which may reduce our strategic and operating flexibility.
Our ability to engage in significant equity transactions could be limited or restricted in order to preserve, for U.S. federal income tax purposes, the tax-free nature
of the distribution by DuPont. Even if the distribution otherwise qualifies for tax-free treatment under Section 355 of the Code, the distribution may result in
corporate-level taxable gain to DuPont under Sections 355(e) and 368(a)(1)(D) of the Code if 50 percent or more, by vote or value, of shares of our stock or
DuPont’s stock are acquired or issued as part of a plan or series of related transactions that includes the distribution. The process for determining whether an
acquisition or issuance triggering these provisions has occurred is complex, inherently factual and subject to interpretation of the facts and circumstances of a
particular case. Any acquisitions or issuances of our stock or DuPont’s stock within a two-year period after the distribution generally are presumed to be part of
such a plan, although we or DuPont, as applicable, may be able to rebut that presumption. Accordingly, under the tax matters agreement entered into prior to the
spin-off, for the two-year period following the distribution, we are prohibited, except in certain circumstances, from:
•
entering into any transaction resulting in the acquisition of 40 percent or more of our stock or substantially all of our assets, whether by merger or
otherwise;
• merging, consolidating or liquidating;
•
•
•
issuing equity securities beyond certain thresholds;
repurchasing our capital stock; or
ceasing to actively conduct our business.
27
Table of Contents
These restrictions may limit our ability to pursue certain strategic transactions or other transactions, including our transformation plans, that we may believe to
otherwise be in our best interests or that might increase the value of our business. In addition, under the tax matters agreement, we are required to indemnify
DuPont against any such tax liabilities as a result of the acquisition of our stock or assets, even if we do not participate in or otherwise facilitate the acquisition.
We may be unable to make, on a timely or cost-effective basis, the changes necessary to operate efficiently as an independent company.
We historically operated as part of DuPont’s corporate organization, and DuPont assisted us by providing various corporate functions. Following the separation
and distribution, DuPont has no obligation to provide us with assistance other than certain transition services. These services do not include every service we
received from DuPont in the past, and DuPont is only obligated to provide these services for limited periods from the distribution date. Accordingly, following the
separation and distribution, we need to provide internally or obtain from unaffiliated third parties the services we received from DuPont. These services include
information technology, research and development, finance, legal, insurance, compliance and human resources activities, the effective and appropriate performance
of which is critical to our operations. We may be unable to replace these services in a timely manner or on terms and conditions as favorable as those we received
from DuPont. In particular, DuPont’s information technology networks and systems are complex, and duplicating these networks and systems will be challenging.
Because our business previously operated as part of the wider DuPont organization, we may be unable to successfully establish the infrastructure or implement the
changes necessary to operate independently, or we may incur additional costs that could adversely affect our business.
There is a risk that, since separating from DuPont, we are more susceptible to market fluctuations and other adverse events than we would have been if we were
still a part of DuPont’s organizational structure. As part of DuPont, we were able to enjoy certain benefits from DuPont’s operating diversity, purchasing power
and opportunities to pursue integrated strategies with DuPont’s other businesses. As an independent, publicly traded company, we do not have similar diversity or
integration opportunities and do not have similar purchasing power or access to capital markets. Additionally, as part of DuPont, we were able to leverage the
DuPont historical market reputation and performance and brand identity to recruit and retain key personnel to run our business. As an independent, publicly traded
company, we do not have the same historical market reputation and performance or brand identity as DuPont and it may be more difficult for us to recruit or retain
such key personnel.
Risks Related to Our Common Stock
Our stock price could become more volatile and investments could lose value.
The market price of our common stock and the number of shares traded each day has experienced significant fluctuations since our separation from DuPont and
may continue to fluctuate significantly. The market price for our common stock may be affected by a number of factors, including, but not limited to:
•
•
•
•
•
•
•
•
•
•
•
our quarterly or annual earnings, or those of other companies in our industry;
actual or anticipated fluctuations in our operating results;
changes in earnings estimates by securities analysts or our ability to meet those estimates or our earnings guidance;
anticipated outcomes or resolutions of legal or other contingencies;
the operating and stock price performance of other comparable companies;
credit rating agency actions;
a change in our dividend or stock repurchase activities;
changes in rules or regulations applicable to our business;
the announcement of new products by us or our competitors;
overall market fluctuations and domestic and worldwide economic conditions; and
other factors described in these “Risk Factors” and elsewhere in this Form 10-K.
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Table of Contents
A significant drop in our stock price, such as that experienced in the period from July 1, 2015 to the date of this filing, could expose us to costly and time-
consuming litigation, which could result in substantial costs and divert management's attention and resources, resulting in an adverse effect on our business.
We cannot guarantee the timing, amount, or payment of dividends on our common stock in the future.
The declaration, payment and amount of any dividend are subject to the sole discretion of our Board of Directors and, in the context of our financial policy, will
depend upon many factors, including our financial condition and prospects, our capital requirements and access to capital markets, covenants associated with
certain of our debt obligations, legal requirements and other factors that our Board of Directors may deem relevant, and there can be no assurances that we will
continue to pay a dividend in the future.
A stockholder's percentage of ownership in us may be diluted in the future.
A stockholder's percentage ownership in us may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including,
without limitation, equity awards that we may be granting to our directors, officers and employees. Such issuances may have a dilutive effect on our earnings per
share, which could adversely affect the market price of our common stock.
In addition, our amended and restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of
preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common
stock with respect to dividends and distributions, as our board of directors generally may determine. The terms of one or more classes or series of preferred stock
could dilute the voting power or reduce the value of our common stock. For example, we could grant the holders of preferred stock the right to elect some number
of our directors in all events or on the happening of specified events or to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation
preferences we could assign to holders of preferred stock could affect the residual value of our common stock.
Certain provisions in our amended and restated certificate of incorporation and amended and restated by-laws, and of Delaware law, may prevent or delay an
acquisition of us, which could decrease the trading price of the common stock.
Our amended and restated certificate of incorporation and amended and restated by-laws contain, and Delaware law contains, provisions that are intended to deter
coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective
acquirers to negotiate with our Board of Directors rather than to attempt a hostile takeover. These provisions include, among others:
•
•
•
•
•
•
•
the inability of our stockholders to act by written consent;
the limited ability of our stockholders to call a special meeting;
rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;
the right of our board of directors to issue preferred stock without stockholder approval;
the division of our board of directors into three approximately equal classes of directors, with each class serving a staggered three-year term, which will
result in, under Delaware law, stockholders only being permitted to remove directors for cause;
the ability of our directors, and not stockholders, to fill vacancies (including those resulting from an enlargement of the board of directors) on our board of
directors; and
the requirement that stockholders holding at least 80 percent of our voting stock are required to amend certain provisions in our amended and restated
certificate of incorporation and our amended and restated by-laws.
In addition, we are subject to Section 203 of the Delaware General Corporations Law (the DGCL). Section 203 provides that, subject to limited exceptions, persons
that (without prior board approval) acquire, or are affiliated with a person that acquires, more than 15 percent of the outstanding voting stock of a Delaware
corporation shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-
year period following the date on which that person or its affiliate becomes the holder of more than 15 percent of the corporation’s outstanding voting stock.
We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our
board of directors and by providing our board of directors with more time to assess any
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Table of Contents
acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if an acquisition proposal or
offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in our best interests
and our stockholders’. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
Several of the agreements that we have entered into with DuPont require DuPont’s consent to any assignment by us of our rights and obligations, or a change of
control of us, under the agreements. The consent rights set forth in these agreements might discourage, delay or prevent a change of control that a stockholder may
consider favorable.
In addition, an acquisition or further issuance of our stock could trigger the application of Section 355(e) of the Code. Under the tax matters agreement executed
prior to the spin-off, we would be required to indemnify DuPont for the tax imposed under Section 355(e) of the Code resulting from an acquisition or issuance of
its stock, even if it did not participate in or otherwise facilitate the acquisition, and this indemnity obligation might discourage, delay or prevent a change of control
that a stockholder may consider favorable. Please see the risk factor " If
the
distribution,
together
with
certain
related
transactions,
were
to
fail
to
qualify
for
non-
recognition
treatment
for
U.S.
federal
income
tax
purposes,
then
we
could
be
subject
to
significant
tax
and
indemnification
liability
and
stockholders
receiving
our
common
stock
in
the
distribution
could
be
subject
to
significant
tax
liability."
for further information.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
Chemours Production Facilities and Technical Centers
Our corporate headquarters is in Wilmington, Delaware, and we maintain a global network of production facilities and technical centers located in cost-effective
and strategic locations. We also use contract manufacturing and joint venture partners in order to provide regional access or to lower manufacturing costs as
appropriate. The following chart lists our production facilities as of December 31, 2015 :
North America
Titanium Technologies
DeLisle, MS
New Johnsonville, TN
Starke, FL (Mine)
Europe, Middle
East & Africa
(EMEA)
Latin America
Asia Pacific
Altamira, Mexico
Kuan Yin, Taiwan
Production Facilities
Fluoroproducts
El Dorado, AR 1
Elkton, MD 1
Louisville, KY
Fayetteville, NC
Deepwater, NJ
Corpus Christi, TX
LaPorte, TX 2
Washington, WV
Maitland, Canada
Mechelen, Belgium
Villers St. Paul, France 1
Dordrecht, Netherlands
Barra Mansa, Brazil 2
Changshu, China
Chiba, Japan
(Joint Venture)
Shimizu, Japan
(Joint Venture)
30
Chemical Solutions
Shared Locations
Belle, WV 3
Red Lion, DE 1
Wurtland, KY
Burnside, LA
Pascagoula, MS
Morses Mill, NJ 1
Niagara, NY 4
Fort Hill, OH
N. Kingstown, RI 1
Memphis, TN
Beaumont, TX 5
Borderland, TX 1
James River, VA
Sudbury, UK
Table of Contents
1 Leased from third party.
2 Leased from DuPont.
3 Shared facility between the Chemical Solutions and Fluoroproducts segments.
4 During the fourth quarter of 2015, the Company announced its plan to stop production at this facility by the end of 2016. See the Recent Developments section in
Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 6 to the Consolidated Financial Statements for further
information regarding our plans for this facility.
5 At December 31, 2015, this location was classified as held-for-sale.
We have technical centers and R&D facilities located at a number of our production facilities. We also maintain standalone technical centers to serve our
customers and provide technical support. The following chart lists our standalone technical centers as of December 31, 2015 :
Region
North America
Titanium Technologies
EMEA
Moscow, Russia 1
Latin America
Asia Pacific
Paulinia, Brazil 2
Mexico City, Mexico 1
Technical Centers
Fluoroproducts
Akron, OH 2
Mechelen, Belgium 1
Mantes, France 1
Meyrin, Switzerland 2
Utsonomyia, Japan 2
Chemical Solutions
Shared Locations
Wilmington, DE (All
Segments) 2, 3
Shanghai, China 2
(All Segments)
1 Leased from third party.
2 Leased from DuPont.
3 There are two facilities at this location.
Chemours’ plants and equipment are maintained and in good operating condition. Chemours believes it has sufficient production capacity for its primary products
to meet demand in 2016 . Properties are primarily owned by Chemours; however, certain properties are leased, as noted in the preceding tables.
Chemours recognizes that the security and safety of its operations are critical to its employees, community, and to the future of Chemours. Physical security
measures have been combined with process safety measures (including the use of inherently safer technology), administrative procedures and emergency response
preparedness into an integrated security plan. Prior to the separation, DuPont conducted vulnerability assessments at operating facilities in the U.S. and high
priority sites worldwide and identified and implemented appropriate measures to protect these facilities from physical and cyber-attacks. Chemours intends to
conduct similar vulnerability assessments periodically in the future. Chemours is partnering with carriers, including railroad, shipping and trucking companies, to
secure chemicals in transit.
Item 3. LEGAL PROCEEDINGS
Legal Proceedings
The Company is subject to various litigation matters, including, but not limited to, product liability, patent infringement, antitrust claims and claims for third party
property damage or personal injury stemming from alleged environmental torts. Information regarding certain of these matters is set forth below and in Note 19 to
the Consolidated Financial Statements.
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Table of Contents
Litigation
PFOA:
Environmental
and
Litigation
Proceedings
For purposes of this report, the term PFOA means collectively perfluorooctanoic acid and its salts, including the ammonium salt and does not distinguish between
the two forms. Information related to this matter is included in Note 19 to the Consolidated Financial Statements under the heading PFOA.
Environmental Proceedings
LaPorte
Plant,
LaPorte,
Texas
The U.S. Environmental Protection Agency (EPA) conducted a multimedia inspection at the DuPont LaPorte facility in January 2008. DuPont, the EPA and the
Department of Justice (DOJ) began discussions in the fall of 2011 relating to the management of certain materials in the facility's waste water treatment system,
hazardous waste management, flare and air emissions. These negotiations continue.
Beaumont
Plant,
Nederland,
Texas
On September 10, 2015, the Company agreed to a proposed order from the Texas Commission on Environmental Quality to resolve an alleged violation of its air
quality permits at the Beaumont facility. The TCEQ commissioners approved the agreed order on enforcement that included an administrative penalty in the
amount of approximately $128,000.
Wurtland
Plant,
Wurtland,
Kentucky
DuPont signed a Consent Decree in 2007 in which it agreed to retrofit its four sulfuric acid plants, including the Wurtland Plant. After the retrofitting was
complete, the Wurtland plant conducted a test burn in 2012 as required by the Decree. The EPA concluded the test burn did not demonstrate compliance and
required a second trial burn in 2013, which the EPA found satisfactory. The DOJ is seeking stipulated penalties on the grounds that compliance was not
demonstrated in 2012, and the plant failed to provide timely notice of the 2012 test, as required by the Decree. Negotiations with the DOJ are ongoing.
Item 4. MINE SAFETY DISCLOSURES
Information regarding mine safety and other regulatory actions at the Company's surface mine in Starke, Florida is included in Exhibit 95 to this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the executive officers and a summary of their professional experience:
Mark
P.
Vergnano
, age 58, serves as our President and Chief Executive Officer. In October 2009, Mr. Vergnano was appointed Executive Vice President of
DuPont and was responsible for multiple businesses and functions, including the businesses in the Chemours segment: DuPont Chemicals & Fluoroproducts and
Titanium Technologies. In June 2006, he was named Group Vice President of DuPont Safety & Protection. In October 2005, he was named Vice President and
General Manager - Surfaces and Building Innovations. In February 2003, he was named Vice President and General Manager -Nonwovens. Prior to that, he had
several assignments in manufacturing, technology, marketing, sales and business strategy. Mr. Vergnano joined DuPont in 1980 as a process engineer.
Mr. Vergnano serves on the board of directors of Johnson Controls, Inc., since 2011; the National Safety Council, since 2007; and the American Chemistry
Council, since 2015.
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Table of Contents
Mark
E.
Newman
, age 52, serves as our Senior Vice President and Chief Financial Officer. Mr. Newman joined Chemours in November 2014 from SunCoke
Energy where he was SunCoke Energy’s Senior Vice President and Chief Financial Officer and led its financial, strategy, business development and information
technology functions. Mr. Newman joined SunCoke’s leadership team in March 2011 to help drive SunCoke’s separation from its parent company, Sunoco, Inc.
He led SunCoke through an initial public offering and championed a major restructuring of SunCoke, which resulted in the initial public offering of SunCoke
Energy Partners in January 2013, creating the first coke-manufacturing master limited partnership. Prior to joining SunCoke, Mr. Newman served as Vice
President Remarketing & Managing Director of SmartAuction, Ally Financial Inc (previously General Motors Acceptance Corporation). Mr. Newman began his
career at General Motors in 1986 as an Industrial Engineer and progressed through several financial and operational leadership roles within the global automaker,
including Vice President and Chief Financial Officer of Shanghai General Motors Limited; Assistant Treasurer of General Motors Corporation; and North America
Vice President and CFO.
E.
Bryan
Snell
, age 59, serves as our President - Titanium Technologies. Mr. Snell was appointed President - Titanium Technologies in May 2015. Previously, he
served as Planning Director - DuPont Performance Chemicals (2014-2015). Prior to that, he held leadership positions in DuPont Titanium Technologies, including
Planning Director (2011-12 in Wilmington, DE and 2012-13 in Singapore) and Global Sales and Marketing Director (2008-2010). Mr. Snell served as Regional
Operations Director - DuPont Coatings and Color Technologies Platform in 2007 and 2008. He was posted in Taiwan from 2002 to 2006, in the roles of Plant
Manager -Kuan Yin Plant and Asia/Pacific Regional Director, DuPont Titanium Technologies. Mr. Snell joined DuPont in 1978 as a process engineer and has
experience in nuclear and petrochemical operations, as well as sales, business strategy and M&A.
Thierry
F.J.
Vanlancker
, age 51, serves as our President - Fluoroproducts. Mr. Vanlancker was named president - DuPont Chemicals & Fluoroproducts in May
2012. He was named vice president for DuPont Performance Coatings - EMEA in November 2010. In 2006, he moved to Wilmington, Delaware to serve as global
business and market director - Fluorochemicals. In 2004, after two years as sales manager for all Refinish Brands EMEA, he was appointed as regional director -
Fluoroproducts EMEA based in Geneva, Switzerland. He moved to Belgium in 1999 to be part of the Herberts Acquisition/Integration Team within the newly
formed DuPont Performance Coatings business and in 2000 was appointed business manager for the Spies Hecker Refinish paint brand based in Cologne,
Germany. In 1996, he transferred to Wilmington, Delaware as global technical service manager for P&IP and was appointed global product manager Vamac ®
ethylene acrylic elastomers in 1998. In 1993 he transferred to Bad Homburg, Germany, and was appointed market development consultant for P&IP Europe,
Middle East & Africa (EMEA). Mr. Vanlancker joined DuPont in 1988 in Belgium as a sales representative.
Christian
W.
Siemer
, age 57, serves as our President - Chemical Solutions. He moved to this role in July 2014. Mr. Siemer joined DuPont in 2010 as the Managing
Director of Clean Technologies, a business unit of DuPont Sustainable Solutions focused on process technology development and licensing. He led the successful
acquisition of MECS Inc., the global leader in technology for the production of sulfuric acid. Mr. Siemer began his career in 1980 with Stauffer Chemicals as a
process engineer. Following Stauffer’s acquisition by ICI plc, Mr. Siemer moved through a range of commercial roles and overseas assignments managing
portfolios of international industrial and specialty chemical businesses.
David
C.
Shelton
, age 52, serves as our Senior Vice President, General Counsel and Corporate Secretary. In 2011, Mr. Shelton was appointed Associate General
Counsel, DuPont, and was responsible for the US Commercial team - the business lawyers and paralegals counseling all the DuPont business units with the
exception of Agriculture and Pioneer. Mr. Shelton was the Commercial attorney to a variety of DuPont businesses including the Performance Materials platform,
which he advised on international assignment in Geneva, and the businesses now comprising the DuPont Chemicals and Fluoroproducts business unit. Prior to that,
Mr. Shelton advised the company on environmental and remediation matters as part of the environmental legal team. Mr. Shelton joined DuPont in 1996, after
seven years in private practice as a litigator in Pennsylvania and New Jersey.
Beth
Albright
, age 49, serves as our Senior Vice President Human Resources. Mrs. Albright joined DuPont in October 2014 from Day & Zimmermann, where she
held the position of Senior Vice-President Human Resources since May 2011. Prior to her experience at Day & Zimmermann, Mrs. Albright was the Global Vice
President Human Resources for Tekni-Plex, which she joined in July 2009. She joined Rohm and Haas in 2000 and held various Human Resources supporting
global businesses, technology, manufacturing and staff functions. In 1995 she joined FMC as site Human Resources manager at a manufacturing site and
progressed into the corporate office. Mrs. Albright began her career with Fluor Daniel Construction in their Industrial Relations department in 1989.
Erich
Parker
, age 65, serves as our Vice President of Corporate Communications and Chief Brand Officer. Mr. Parker was appointed Creative Director and Global
Director of Corporate Communications of DuPont in 2010. He led the initiative to develop corporate positioning and its creative expression through branded
content and program sponsorship with large international media outlets. In 2008, Mr. Parker was appointed Communications Leader for DuPont’s Safety and
Protection Platform. Prior to joining DuPont,
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Table of Contents
Mr. Parker was principal of his own public relations and marketing communications firm based in Washington, D.C., and New York. Mr. Parker has also served as
Executive Vice President of Association & Issues Management; Director of Communications for the American Academy of Actuaries; founding publisher and
Executive Editor of the magazine Contingencies; and Public Affairs Aide for Renewable Energy to the Secretary of Energy, U.S. Department of Energy.
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Table of Contents
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market for Registrant's Common Equity and Related Stockholder Matters
The company's common stock is listed on the New York Stock Exchange, Inc. (symbol CC). The number of record holders of common stock was approximately
56,880 at February 19, 2016.
Holders of the Company's common stock are entitled to receive dividends when they are declared by the Board of Directors. Dividends on common stock are
generally declared and paid on a quarterly basis. The Stock Transfer Agent and Registrar is Computershare Trust Company, N.A.
The company's stock began trading on July 1, 2015. The quarterly high and low trading stock prices and dividends per common share for 2015 are shown below.
2015
Fourth Quarter
Third Quarter
Market Prices
Low
4.58
5.94
Per Share Dividend
Declared
$0.03
$0.55 1
High
8.80
16.68
1 Dividend was declared prior to our separation from DuPont and paid on September 11, 2015 to our stockholders of record as of August 3, 2015.
Unregistered Sales of Equity Securities
Not Applicable.
Issuer Purchases of Equity Securities
Not Applicable.
35
Table of Contents
Stock Performance Graph
The following graph presents the cumulative total shareholder return for the Company's common stock compared with the Standard & Poor's (S&P) MidCap 400
index and the S&P MidCap 400 Chemical index since our separation from DuPont.
The graph assumes that the values of Chemours' common stock, the S&P MidCap 400 index, and S&P MidCap 400 Chemical index were each $100 on July 1,
2015, the date that Chemours' common stock began "regular-way" trading on the New York Stock Exchange, and that all dividends were reinvested.
On January 29, 2016, Chemours was moved from the S&P MidCap 400 index to the S&P SmallCap 600 index.
Item 6. SELECTED FINANCIAL DATA
The following table presents Chemours’ selected financial data. For periods ended December 31, 2011 through 2014, and for the first six months of the year ended
December 31, 2015, certain expenses of DuPont were allocated to Chemours for corporate functions including information technology, research and development,
finance, legal, insurance, compliance and human resources activities prior to our spin-off on July 1, 2015. Consequently, the financial information included here
may not necessarily reflect what Chemours’ financial position, results of operations and cash flows would have been had it been an independent, publicly traded
company during the periods presented. Certain reclassifications of prior years' data have been made to conform to the current year's presentation, primarily relating
to the early adoption of balance sheet classification of deferred taxes discussed in Note 3 to the Consolidated Financial Statements.
For a better understanding, this section should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and the Consolidated Financial Statements and accompanying notes included elsewhere in this Annual Report on Form 10-K.
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Table of Contents
(Dollars in millions, except per share data)
Year Ended December 31,
Summary of operations:
Net sales
Employee separation and asset related charges, net
(Loss) income before income taxes
(Benefit from) provision for income taxes
Net (loss) income attributable to Chemours
Basic (loss) earnings per share of common stock 1
Diluted (loss) earnings per share of common stock 1
Financial position at year end:
Working capital 2
Total assets
Borrowings and capital lease obligations, net 3
General:
Purchases of property, plant and equipment
Depreciation and amortization
Dividends per common share 4
2015
2014
2013
2012
2011
$
5,717 $
6,432 $
6,859 $
7,365 $
333
(188)
(98)
(90)
(0.50)
(0.50)
835
6,298
3,954
519
267
0.58
21
550
149
400
2.21
2.21
543
5,959
1
604
257
—
2
576
152
423
2.34
2.34
474
5,580
1
438
261
—
36
1,485
427
1,057
5.84
5.84
601
5,309
1
432
266
—
7,972
—
1,907
474
1,431
7.91
7.91
585
5,242
2
355
272
—
1 For 2011-2014, pro forma earnings per share (EPS) was calculated based on 180,996,833 shares of Chemours common stock that were distributed to DuPont
shareholders on July 1, 2015. The same number of shares was used to calculate basic and diluted earnings per share since no Chemours equity awards were outstanding
prior to the separation.
2 Current assets minus current liabilities.
3 Amount as of December 31, 2015 includes unamortized debt issuance costs of $60 million.
4 Includes the following:
• dividend of an aggregate amount of $100 million declared prior to separation by our then-Board of Directors (consisting of DuPont employees), which was paid on
September 11, 2015 to our stockholders of record as of August 3, 2015, and
• dividend of $0.03 per share declared after separation by our independent Board of Directors which was paid on December 14, 2015 to our stockholders of record as of
November 13, 2015.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
Management’s discussion and analysis, which we refer to as “MD&A”, of our results of operations and financial condition supplements the Consolidated Financial
Statements and related notes included elsewhere herein to help provide an understanding of our financial condition, changes in financial condition and results of
our operations. The discussion and analysis presented below refer to and should be read in conjunction with the Consolidated Financial Statements and the related
notes included elsewhere in this Annual Report on Form 10-K .
Overview
Chemours is a leading global provider of products that are key inputs in end-products and processes in a variety of industries. We deliver customized solutions with
a wide range of industrial and specialty chemical products for markets including plastics and coatings, refrigeration and air conditioning, general industrial, mining
and oil refining. Principal products include titanium dioxide, refrigerants, industrial fluoropolymer resins and a portfolio of industrial chemicals including sodium
cyanide.
Chemours manages and reports operating results through three reportable segments: Titanium Technologies, Fluoroproducts and Chemical Solutions. Our position
with each of these businesses reflects the strong value proposition we provide to our customers based on our long history and reputation in the chemical industry
for safety, quality and reliability.
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Table of Contents
On July 1, 2015 (the Distribution Date), DuPont completed the previously announced spin-off of Chemours by distributing Chemours' common stock, on a pro rata
basis, to DuPont's stockholders of record as of the close of business on June 23, 2015 (the Record Date) (the transaction referred to herein as the Distribution). On
the Distribution Date, each holder of DuPont common stock received one share of Chemours' common stock for every five shares of DuPont's common stock held
on the Record Date. The spin-off was completed pursuant to a separation agreement and several other agreements with DuPont related to the spin-off, including an
employee matters agreement, a tax matters agreement, a transition services agreement and an intellectual property cross-license agreement, each of which was filed
with the SEC as an exhibit to our Current Report on Form 8-K on July 1, 2015. These agreements govern the relationship among Chemours and DuPont following
the spin-off and provide for the allocation of various assets, liabilities, rights and obligations. These agreements also include arrangements for transition services to
be provided by DuPont to Chemours.
Basis
of
Presentation
Prior to July 1, 2015, Chemours operations were included in DuPont's financial results in different legal forms, including but not limited to wholly-owned
subsidiaries for which Chemours was the sole business, components of legal entities in which Chemours operated in conjunction with other DuPont businesses and
a majority owned joint venture. For periods prior to July 1, 2015, the Consolidated Financial Statements, included elsewhere in this Annual Report on Form 10-K,
have been prepared from DuPont’s historical accounting records and are presented on a stand-alone basis as if the business operations had been conducted
independently from DuPont. The Consolidated Financial Statements include the historical operations, assets and liabilities of the legal entities that are considered
to comprise the Chemours business, including certain environmental remediation and litigation obligations of DuPont and its subsidiaries that Chemours may be
required to indemnify pursuant to the separation-related agreements executed prior to the Distribution. All of the allocations and estimates in the Consolidated
Financial Statements prior to July 1, 2015 are based on assumptions that management believes are reasonable.
Recent Developments
Transformation Plan
During the third quarter of 2015, Chemours announced a plan to transform the company by reducing structural costs, growing market positions, optimizing its
portfolio, refocusing investments, and enhancing its organization. Chemours expects the transformation plan to deliver $500 million of incremental Adjusted
EBITDA improvement over 2015 through 2017. Based on our anticipated cost reduction and growth initiatives, we would expect an approximately similar
improvement in pre-tax income. Through a combination of higher free cash flow from operations, lower capital spending, and potential proceeds from asset sales,
the Company anticipates reducing its leverage ratio (net debt to Adjusted EBITDA) to approximately three times by year-end 2017. See Non-GAAP Financial
Measures included herein for a definition of Adjusted EBITDA and other information regarding our use of non-GAAP measures.
Key actions initiated under the transformation plan during 2015 included Titanium Technologies plant and production line closures, Fluoroproduct line closures,
announcement of the Reactive Metals Solutions (RMS) plant closure, global workforce reductions, and lower service, real estate and procurement costs.
Global
Workforce
Reductions
In June 2015, in light of continued weakness in the global titanium dioxide market cycle and continued foreign currency impacts due to the strengthening of the
U.S. dollar, Chemours implemented a restructuring plan to reduce and simplify its cost structure. This plan resulted in a global workforce reductions of more than
430 positions. As a result of this action, we recorded a pre-tax charge of $64 million for employee separation costs in the year ended December 31, 2015 . The
actions associated with this charge and all related payments are expected to be substantially complete by the end of 2016.
In November 2015, Chemours announced an additional global workforce reduction of approximately 430 positions. This action is part of ongoing efforts to
streamline and simplify the structure of the organization worldwide and to reduce costs. As a result of this action, the Company recorded approximately $48
million of employee separation costs during the fourth quarter of 2015. The Company expects to complete this headcount reduction during 2016 and related
payments are expected to be substantially complete in 2017.
Titanium
Technologies
Plant
Closures
In August 2015, the Company announced the closure of its Edge Moor, Delaware manufacturing site. The Edge Moor plant produced TiO 2 product for use in the
paper industry and other applications where demand has declined steadily and has resulted
38
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in underused capacity at the plant. In addition, as part of the plan, the Company permanently shut down one underused TiO 2 production line at its New
Johnsonville, Tennessee plant. The Company stopped production at Edge Moor in September 2015 and immediately began decommissioning the plant. The
Company expects to complete decommissioning activities in the first quarter of 2016 and will begin dismantling thereafter. Dismantling and removal activities are
expected to be completed in early 2017.
As a result, during the year ended December 31, 2015, the Company recorded charges of approximately $140 million , which consist of property, plant and
equipment and other asset impairment charges of $115 million , employee separation costs of $11 million and decommissioning costs of $14 million . These
charges were allocated entirely to the Titanium Technology segment. The Company also expects to incur additional charges of approximately $50 million for
decommissioning, dismantling and removal costs in 2016 to early 2017, which will be expensed as incurred. Because the Company is still in the early stages of
implementing this plan, the amount and timing of the above estimates may differ materially from the amounts provided.
Fluoroproducts
Restructuring
During the third quarter of 2015, in connection with the Company’s transformation plan announced in August 2015 and efforts to improve the profitability of the
Fluoroproducts segment, management approved the shutdown of certain production lines of the segment’s manufacturing facilities in the United States. As a
result, the Company recorded restructuring charges of approximately $21 million , which consist of property, plant and equipment accelerated depreciation of $18
million , employee separation costs of $2 million and decommissioning costs of $1 million . The Company also expects to incur approximately $5 million of
additional decommissioning, dismantling and removal costs in 2016 through 2017.
Chemical
Solutions
Portfolio
Optimization
Actions
In November 2015, the Company signed a definitive agreement to sell its aniline facility in Beaumont, Texas to The Dow Chemical Company (Dow) for
approximately $140 million in cash. The Company expects the transaction to close and record gain on sale in the first quarter of 2016. At December 31, 2015, the
assets at Beaumont were classified as held for sale on the Company's Consolidated Balance Sheet. As part of this transaction, Chemours has entered into an
agreement to meet Dow’s additional aniline supply requirements with production from its Pascagoula, Mississippi facility. Chemours will also continue to serve
other aniline customers from its Pascagoula plant.
Also during the fourth quarter of 2015, the Company announced the completion of the strategic review of its Reactive Metals Solutions (RMS) business and the
decision to stop production at the Niagara Falls, NY site by the end of December 2016. The Niagara Falls plant has approximately 200 employees and contractors
that will be impacted by this action. As a result, in the fourth quarter of 2015, the Company recorded approximately $12 million of employee separation costs.
Additional restructuring charges of approximately $15 million for contract termination, decommissioning and site redevelopment are expected to be incurred in
2016 through 2018. Because the Company is still in the early stages of implementing this plan, the amount and timing of the above estimates may differ materially
from the amounts provided.
Prior to the plant closure decision, the RMS plant assets were evaluated for impairment during the third quarter of 2015. We determined that the manufacturing
facility should be assessed for impairment driven primarily by continued losses experienced by the business. The assessment indicated that the carrying amount of
the long-lived assets were not recoverable when compared to the expected undiscounted cash flows of business. Based on our assessment of the fair value of the
related asset groups, we determined that the carrying value of RMS' asset groups exceeded its fair value. As a result of the impairment test, a $45 million pre-tax
impairment charge was recorded in the Chemical Solutions segment. See Note 12 to the Consolidated Financial Statements for further information.
In addition, also during the third quarter of 2015, the Company determined that indicators were present in the Sulfur reporting unit which suggested that the fair
value of the reporting unit had declined below the carrying value, primarily driven by lower than forecasted revenue and profitability levels for 2015 and future
periods. The interim goodwill impairment analysis performed in the third quarter of 2015 resulted in a goodwill impairment of $25 million in 2015. See Note 13 to
the Consolidated Financial Statements for further information.
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Table of Contents
Our Results and Business Highlights
Revenue and Growth : Net sales for the year ended December 31, 2015 were $5.7 billion , a decrease of 11.1% from $6.4 billion for the year ended December 31,
2014 , which was primarily due to continued pressure on TiO 2 prices, the negative impact of foreign currency and soft demand conditions for certain
fluoropolymers products.
Profitability : We recognized a net loss of $90 million for the year ended December 31, 2015 , compared with net income of $401 million and $424 million for the
same periods in 2014 and 2013 , respectively. The decrease in our profitability during the year was primarily the result of a decline in our net sales as well as the
impact of various restructuring activities discussed in the Recent Developments section of this MD&A and our indebtedness, which resulted to pre-tax charges of
$333 million of employee separation and asset related charges, net and $132 million of interest expense, partially offset by the related income tax benefits of
approximately $150 million. Adjusted EBITDA was $573 million , $876 million and $984 million for the years ended December 31, 2015 , 2014 , and 2013,
respectively.
Results of Operations
(Dollars
in
millions)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expense
Research and development expense
Employee separation and asset related charges, net
Goodwill impairment
Total expenses
Equity in earnings of affiliates
Interest expense, net
Other income, net
(Loss) income before income taxes
(Benefit from) provision for income taxes
Net (loss) income
Less: Net income attributable to noncontrolling interests
Year Ended December 31,
2015
2014
2013
$
5,717 $
4,762
955
632
97
333
25
1,087
22
(132)
54
(188)
(98)
(90)
—
6,432 $
5,072
1,360
685
143
21
—
849
20
—
19
550
149
401
1
Net (loss) income attributable to Chemours
$
(90) $
400 $
Net sales
6,859
5,395
1,464
768
164
2
—
934
22
—
24
576
152
424
1
423
For the years ended December 31, 2015 and 2014: The table below shows the impact of price, currency, volume and portfolio on net sales for the year ended
December 31, 2015 compared with 2014 :
(Dollars
in
millions)
2015 Net
Sales
Percentage
Change vs 2014
Local Price
Currency Effect
Volume
Portfolio/Other
Worldwide
$
5,717
(11)%
(5)%
(4)%
(1)%
(1)%
Percentage change due to:
Net sales for the year ended December 31, 2015 were $5.7 billion , a decrease of approximately 11% compared to $6.4 billion for the year ended December 31,
2014 , which was primarily due to continued pressure on TiO 2 prices and the negative impact of foreign currency, offset by price increases in Fluoroproducts and
volume growth in Chemical Solutions portfolio.
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For the years ended December 31, 2014 and 2013: The table below shows the impact of price, currency, volume and portfolio on net sales for the year ended
December 31, 2014 compared with 2013 :
(Dollars
in
millions)
Worldwide
2014 Net
Sales
Percentage
Change vs 2013
Local Price
Currency Effect
Volume
Portfolio/Other
$
6,432
(6)%
(5)%
—%
3%
(4)%
Percentage change due to:
Net sales of $6.4 billion for the year ended December 31, 2014 decreased 6% primarily in comparison with the year ended December 31, 2013 , primarily due to a
portfolio change in the Chemical Solutions segment and lower prices principally for TiO 2 and refrigerants. The portfolio change involved a customer’s election to
exercise a put/call option to acquire the entire property and equipment of the Baytown facility on December 31, 2013. Decreased selling prices for TiO 2 were
partially offset by increased volumes for Opteon TM YF refrigerant.
Cost of goods sold
For the years ended December 31, 2015 and 2014: Cost of goods sold (COGS) decreased 6% during the year ended December 31, 2015 in comparison with the
year ended December 31, 2014 . Approximately 4% of the decrease was driven by lower production costs from lower costs of raw materials, lower employee
benefits and the impact of global headcount reduction as a result of our transformation plan. The decrease was due to lower sales volume and mix, as well slightly
favorable currency impact. COGS as a percentage of net sales increased by 4% to 83% for the year ended December 31, 2015 primarily driven by lower average
prices primarily in TiO 2 and the unfavorable foreign currency impact on our net sales over our fixed U.S. dollar costs.
For the years ended December 31, 2014 and 2013: COGS decreased 6% during the year ended December 31, 2014 in comparison with the year ended
December 31, 2013 . This decrease is primarily driven by a portfolio change in the Chemical Solutions segment involving a customer’s election to exercise a
put/call option to acquire the entire property and equipment of the Baytown facility, coupled with a decrease in pension costs. The portfolio change accounted for
$248 million of the decrease in COGS. The decrease in pension costs was primarily related to improved returns on pension plan assets and an increase in the
discount rate. COGS as a percentage of net sales was 79%, consistent with the year ended December 31, 2013.
The following table shows COGS as a percent of net sales.
(Dollars
in
millions)
Net sales
COGS
COGS as a percent of net sales
Selling, general and administrative expense
Year Ended December 31,
2015
2014
2013
$
$
5,717
4,762
83%
6,432
5,072
79%
6,859
5,395
79%
For the years ended December 31, 2015 and 2014: Selling, general and administrative expense (SG&A) decreased 8% to $ 632 million for the year ended
December 31, 2015 in comparison with the year ended December 31, 2014 . This decrease is primarily driven by the cost reduction initiatives implemented during
the year, such as the global workforce reduction and other initiatives in connection with the transformation plan, as well as lower employee benefits (including
pension), slightly offset by $17 million of transactions, legal and other related charges and approximately $4 million higher stock-based compensation charges
primarily related to the converted awards. SG&A as a percentage of net sales was 11% for both periods.
For the years ended December 31, 2014 and 2013: SG&A decreased 11% to $ 685 million for the year ended December 31, 2014 in comparison with the year
ended December 31, 2013 . This decrease was primarily driven by lower pension costs in 2014 and higher legal fees in 2013 related to the TiO 2 antitrust litigation,
which was resolved in 2013. SG&A as a percentage of net sales was 11% for both periods.
Research and development expense
For the years ended December 31, 2015 and 2014: Research and development (R&D) expense decreased by $46 million or 32% for the year ended
December 31, 2015 in comparison with the year ended December 31, 2014 . Reductions in R&D spend
41
Table of Contents
were primarily driven by decisions to either delay or terminate projects following our separation from DuPont. The global workforce reduction initiative also
impacted the R&D function and contributed to the decrease in R&D expense. R&D expense as a percentage of net sales was 2% for both periods.
For the years ended December 31, 2014 and 2013: R&D decreased by $21 million for the year ended December 31, 2014 in comparison with the year ended
December 31, 2013 , primarily due to lower pension costs. R&D expense as a percentage of net sales was 2% for both periods.
Interest expense, net
We incurred interest expense of $132 million for the year ended December 31, 2015 related to our financing transactions completed in May 2015 in connection
with the separation. There was no comparable expense in 2014 or 2013. Refer to Note 18 to the Consolidated Financial Statements and the Liquidity and Capital
Resources section of this MD&A for additional information related to our indebtedness.
Employee separation and asset related charges, net
For the year ended December 31, 2015 , we recorded pre-tax charges of approximately $333 million for employee separation and other asset related charges in
connection with various restructuring activities during the year. This cost includes $112 million severance charges from our global workforce reduction, $140
million related to our capacity optimization in our Titanium Technologies segment, including the closure of our Edge Moor production facility, $21 million of
Fluoroproducts restructuring activities, $57 million of restructuring relating to our Chemical Solutions segment, and impairment charges. See the Recent
Developments section of this MD&A for further information.
Other income, net
For the years ended December 31, 2015 and 2014: For the year ended December 31, 2015 compared to the year ended December 31, 2014 , other income, net
increased by $35 million . This change is comprised of a $42 million gain on foreign exchange forward contracts, lower foreign currency exchange losses of
approximately $23 million driven by the continued strengthening of the U.S. dollar versus the Mexican peso, the Euro and other currencies, and additional
technology and licensing income of approximately $11 million. These increases were offset by a loss on sale of assets and businesses of $9 million in 2015
compared to the gain of $40 million recognized in 2014 discussed below. See Note 7 to the Consolidated Financial Statements for details of Other income, net.
For the years ended December 31, 2014 and 2013: For the year ended December 31, 2014 compared to the year ended December 31, 2013 , other income, net
decreased by $5 million . This change is comprised of a $40 million gain on sales of assets and businesses in 2014, offset by a $35 million increase in foreign
currency exchange losses, driven by the strengthening of the U.S. dollar versus the Euro and Swiss franc in 2014, and a reduction of $7 million for leasing, contract
services and miscellaneous income. In addition, for the year ended December 31, 2013, Chemours recognized a $7 million gain on purchase of an equity
investment that did not occur in 2014.
(Benefit from) provision for income taxes
For the years ended December 31, 2015 and 2014: For the year ended December 31, 2015 , Chemours recorded a tax benefit of $98 million with an effective
income tax rate of approximately 52% . For the year ended December 31, 2014 , Chemours recorded a tax provision of $149 million with an effective tax rate of
approximately 27% . The $247 million decrease in the tax provision and the corresponding increase in effective tax rate were due primarily to tax benefits
recognized from the restructuring and asset impairment charges in the U.S. recorded in the second half of 2015, partially offset by earnings in foreign jurisdictions.
For the years ended December 31, 2014 and 2013: For the year ended December 31, 2014 , Chemours recorded a tax provision of $149 million with an effective
income tax rate of approximately 27% . For the year ended December 31, 2013 , Chemours recorded a tax provision of $152 million with an effective income tax
rate of approximately 26% . The decrease in the tax provision was primarily due to a decrease in earnings. The increase in the effective tax rate in 2014 compared
to 2013 was primarily due to the geographic mix of earnings and valuation allowance partly offset by a one-time tax benefit recognized in 2014 relating to a tax
accounting method change. This tax accounting method change allowed an increase in tax basis in certain depreciable fixed assets which resulted in a net tax
benefit for Chemours of $10 million in 2014.
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Table of Contents
Segment Reviews
Adjusted EBITDA represents our primary measure of segment performance and is defined as income (loss) before income taxes excluding the following:
•
•
•
•
•
•
•
interest expense, depreciation and amortization,
non-operating pension and other postretirement employee benefit costs,
exchange gains (losses),
employee separation, asset-related charges and other charges, net,
asset impairments,
gains (losses) on sale of business or assets, and
other items not considered indicative of our ongoing operational performance and expected to occur infrequently.
A reconciliation of Adjusted EBITDA to net (loss) income for the years ended December 31, 2015 , 2014 and 2013 is included in Non-GAAP Financial Measures
in Item 7 and in Note 23 to the Consolidated Financial Statements.
Titanium Technologies
(Dollars
in
millions)
Segment Net Sales
Adjusted EBITDA
Adjusted EBITDA Margin
Year Ended December 31,
2015
2014
2013
$
2,392
$
326
14%
2,937
723
25%
3,019
726
24%
Change in segment net sales from prior period
Year Ended December 31,
2015
2014
Price
Volume
Currency
Portfolio / Other
Total Change
(12)%
(2)%
(5)%
— %
(19)%
(4)%
1 %
— %
— %
(3)%
2015 versus 2014: Net sales decreased by $545 million or 19% for the year ended December 31, 2015 , compared with the same period in 2014 , due primarily to
lower selling prices and the continued unfavorable effect of foreign currency primarily against the Euro. Oversupply in the global titanium dioxide industry and
weak demand continue to put downward pressure on pricing in all regions .
Adjusted EBITDA decrease d during the year ended December 31, 2015 in comparison with same period in 2014 . Adjusted EBITDA margin also decrease d
during the year ended December 31, 2015 in comparison with same period in 2014. Both decreases were primarily driven by lower sales and margin due to pricing
pressures and unfavorable effects of foreign currency. Offsetting these decreases were productivity improvement initiatives, which resulted in lower raw materials,
energy and plant operating costs, as well as the impact of our cost reduction programs, which included certain Titanium Technology plant shut-downs and global
headcount reductions.
2014 versus 2013: Net sales decrease d by $82 million or 3% for the year ended December 31, 2014 compared with the same period in 2013 . This decrease was
due to lower prices which was partially offset by an increase in volume.
Adjusted EBITDA decreased marginally in 2014 while adjusted EBITDA margin remained relatively consistent in 2014 when compared to 2013 .
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Table of Contents
Fluoroproducts
(Dollars
in
millions)
Segment Net Sales
Adjusted EBITDA
Adjusted EBITDA Margin
Year Ended December 31,
2015
2014
2013
$
2,230
$
2,327
$
300
13%
282
12%
Change in segment net sales from prior period
2015
2014
Year Ended December 31,
Price
Volume
Currency
Portfolio / Other
Total Change
2 %
— %
(4)%
(2)%
(4)%
2,379
395
17%
(8)%
6 %
— %
— %
(2)%
2015 versus 2014: Net sales decreased $97 million or 4% for the year ended December 31, 2015 compared with the same period in 2014 . Net sales were
unfavorably impacted by foreign currency exchange rates, primarily related to the Euro, Brazilian real, and Japanese yen, and continued weaker demand for
industrial resins. Favorable product mix with strong Opteon™ refrigerant adoption delivered increased prices and steady overall volumes over the prior year.
Adjusted EBITDA and adjusted EBITDA margin increase d during the year ended December 31, 2015 in comparison with same periods in 2014 . Both increases
were primarily due to product mix and cost reduction efforts including global headcount reductions during the second half of 2015.
2014 versus 2013 : Net sales decrease d by $52 million or 2% for the year ended December 31, 2014 compared with the same period in 2013 , primarily due to
lower selling prices for refrigerants and industrial resins. Refrigerant prices decreased in North America as a result of actions by the EPA related to allowances on
HCFC's (R-22) and the impact of lower cost Chinese imports on the overall pricing of HFC (R-134a) refrigerants and refrigerant blends globally. Industrial resins
prices declined primarily as a result of pricing pressure from the addition of new production capacity by competitors. Pricing decreases were partially offset by
higher volumes.
Adjusted EBITDA and adjusted EBITDA margin decrease d, primarily due to lower prices and production shutdowns. Margin impact from lower prices was
partially offset by lower business and overhead costs from productivity improvements. Additionally in 2014 , expense relating to the short-term incentive plan was
lower by approximately $8 million.
Chemical Solutions
(Dollars
in
millions)
Segment Net Sales
Adjusted EBITDA
Adjusted EBITDA Margin
Year Ended December 31,
2015
2014
2013
$
1,095
$
1,168
$
29
3%
17
1%
1,461
101
7%
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Change in segment net sales from prior period
Year Ended December 31,
2015
2014
Price
Volume
Currency
Portfolio / Other
Total Change
(5)%
2 %
(3)%
— %
(6)%
(2)%
1 %
— %
(19)%
(20)%
2015 versus 2014: Net sales decreased by $73 million or 6% for the year ended December 31, 2015 compared with the same period in 2014 , primarily due to
lower prices based on contractual pass-through terms, changes in the mix of products sold as well as the unfavorable impact of foreign currency exchange rates
including the Mexican peso, Canadian dollar and the Euro. These decreases were partially offset by volume increases in Cyanide and Sulfur due to strong demand .
Adjusted EBITDA and Adjusted EBITDA margin increase d during the year ended December 31, 2015 in comparison with same period in 2014. The slight
increase in Adjusted EBITDA was driven primarily by lower R&D expense and cost reduction efforts, including the global headcount reductions, during the
second half of 2015.
2014 versus 2013: Net sales decrease d $293 million or 20% , for the year ended December 31, 2014 compared with the same period in 2013 , primarily due to the
portfolio impact of a customer's election to exercise a put/call option to acquire the entire property and equipment of the Baytown facility on December 31, 2013 .
Sales decreased further from lower prices across all products.
Adjusted EBITDA and adjusted EBITDA margin decrease d, primarily due to the portfolio impact noted above and lower prices.
2016 Outlook
With our transformation plan on track, we expect to reduce structural costs by an additional $200 million in 2016. These cost savings are primarily from actions
taken during 2015 including facilities closures, headcount reductions, and procurement and productivity enhancements. In 2016, we suspended annual salary
increases globally, subject to contractual and legal limitations, and we halted a discretionary contribution component in our U.S. 401(k) plan that will contribute
toward our $200 million target. We anticipate that we will need to establish additional cost reduction initiatives during 2016 to realize our target of reducing
structural costs by $350 million through 2017.
For 2016, we believe that those cost reductions in our transformation plan along with growth from Opteon™ and the benefits of our Altamira startup, will help us
deliver full year Adjusted EBITDA above our 2015 performance. Along with a reduction in capital spending, we expect to generate modestly positive free cash
flow during the year. Our outlook reflects our current visibility and expectations on market factors, such as currency movements, TiO 2 pricing, and end-market
demand.
Liquidity and Capital Resources
Prior to our spin-off on July 1, 2015, transfers of cash to and from DuPont’s cash management system were reflected in DuPont Company Net Investment in the
historical Consolidated Balance Sheets, Statements of Cash Flows and Statements of Changes in DuPont Company Net Investment. DuPont funded our cash needs
through the date of the separation. Chemours has a historical pattern of seasonality, with working capital use of cash in the first half of the year, and a working
capital source of cash in the second half of the year.
Chemours' primary source of liquidity is cash generated from operations, available cash and borrowings under the debt financing arrangements as described below.
We believe these sources are sufficient to fund our planned operations and to meet our interest, dividend and contractual obligations. Our financial policy seeks to
deleverage by using free cash flow to repay outstanding borrowings, selectively invest for growth to enhance our portfolio including certain strategic capital
investments, and return cash to shareholders through dividend payments.
While we were a wholly-owned subsidiary of DuPont, our then-Board of Directors, consisting of DuPont employees, declared a dividend of an aggregate amount
of $100 million for the third quarter of 2015, which was paid on September 11, 2015 to our
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stockholders of record as of August 3, 2015. On September 1, 2015, our independent Board of Directors declared a dividend of $0.03 per share, which was paid on
December 14, 2015 to our stockholders of record on November 13, 2015.
The separation agreements set forth a process to true-up cash and working capital transferred to us from DuPont at separation. In January 2016, Chemours and
DuPont entered into an agreement, contingent upon the credit agreement amendment described herein, which provided for the extinguishment of payment
obligations of cash and working capital true-ups previously contemplated in the separation agreements. As a result, Chemours was not required to make any
payments to DuPont, nor did DuPont make any payments to Chemours. In addition, the agreement set forth an advance payment of approximately $190 million,
which was paid to Chemours in February 2016, for certain specified goods and services that Chemours expects to provide to DuPont over the next twelve to fifteen
months under existing agreements with Chemours.
Over the next 12 months, Chemours expects to have significant interest, capital expenditure and restructuring payments. We expect to fund these payments through
cash generated from operations, asset dispositions, available cash and borrowings under the revolving credit facility. We anticipate that our operations and debt
financing arrangements will provide sufficient liquidity over the next 12 months. The availability under our Revolving Credit Facility is subject to the last 12
months of our consolidated EBITDA as defined under the credit agreement.
Cash Flow
The following table sets forth a summary of the net cash provided by (used for) operating, investing and financing activities.
(Dollars
in
millions)
Cash provided by operating activities
Cash used for investing activities
Cash provided by (used for) financing activities
Cash
Provided
by
Operating
Activities
Year Ended December 31,
2015
2014
2013
$
182
$
(497)
687
505
$
(560)
55
798
(424)
(374)
Cash provided by operating activities decreased by $323 million for the year ended December 31, 2015 compared to the same period in 2014 , due to lower
earnings than the prior year, payments on restructuring activities and interest payments on our 2015 financing transactions.
Cash provided by operating activities decreased by $293 million for the year ended December 31, 2014 compared with the same period in 2013 , primarily due to
increased payments of trade accounts payable for raw materials and lower earnings in 2014. The primary cause of the decrease was the timing of ore purchases
with longer payment terms in the second half of 2013, which resulted in payments in early 2014. In addition, Chemours paid $72 million related to titanium
dioxide antitrust litigation in 2014.
Cash
Used
for
Investing
Activities
Cash used for investing activities decreased $63 million for the year ended December 31, 2015 compared to the same period in 2014, primarily as a result of a $85
million decrease in capital expenditures of which $80 million relates to the expansion of Titanium Technologies’ Altamira plant in Mexico and approximately $50
million from other on-going and expansion activities, partially offset by increase in separation-related capital expenditures of $45 million . In addition, we realized
approximately $42 million of net gain from foreign exchange contract settlements entered into in 2015 after the separation and no similar realized gains or losses
were incurred prior to the separation. The decreases in cash used for investing activities are partially offset by incremental investments made to our unconsolidated
affiliate in China and lower sales proceeds due to lesser business and asset sale activities during 2015.
Cash used for investing activities increased $136 million for 2014 compared to the same period in 2013 primarily due to the expansion of Titanium Technologies’
Altamira plant in Mexico.
Capital expenditures relating to our Altamira expansion were $146 million , $227 million and $159 million for the years ended December 31, 2015 , 2014 and
2013, respectively.
Cash
Provided
by
(Used
for)
Financing
Activities
Cash provided by financing activities increased by $632 million for the year ended December 31, 2015 compared to the same period in 2014, due primarily from
the proceeds from our financing transactions offset by the net transfers to DuPont in connection
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with the separation. Through June 30, 2015, DuPont managed Chemours’ cash and financing arrangements and all excess cash generated through earnings was
deemed remitted to DuPont and all sources of cash were deemed funded by DuPont. Prior to the spin-off on July 1, 2015, Chemours remitted approximately $3.4
billion to DuPont in the form of a dividend, using cash received from issuance of debt. See Note 4 to the Consolidated Financial Statements for additional
information.
Cash provided by financing activities was $55 million in 2014 as compared to cash used for financing activities of $374 million in 2013. Lower cash provided by
operations as discussed above and higher purchases of property, plant and equipment of $166 million , primarily due to the Altamira expansion, resulted in cash
transfer from DuPont to fund the Company's operations.
Current Assets
(Dollars
in
millions)
Cash
Accounts and notes receivable - trade, net
Inventories
Prepaid expenses and other
Total current assets
December 31,
2015
December 31,
2014
$
$
366 $
859
972
104
2,301 $
—
846
1,052
43
1,941
In 2014, Chemours participated in DuPont’s centralized cash management and financing programs. Disbursements were made through centralized accounts
payable systems which are operated by DuPont. Cash receipts were transferred to centralized accounts, also maintained by DuPont. As such, we did not reflect a
cash balance in our financial statements prior to separation. Cash as of December 31, 2015 includes the cash provided by DuPont at separation and our net increase
in cash since the separation.
Accounts and notes receivable - trade, net at December 31, 2015 increased $13 million compared to December 31, 2014 primarily due to timing of collections of
trade accounts receivable offset by unfavorable currency translation.
Inventories at December 31, 2015 decreased $80 million compared to December 31, 2014 primarily due to an effort to decrease inventory on hand as well lower
cost of raw materials and lower production costs resulting from our transformation plan.
Prepaid expenses and other increased $61 million primarily due to our aniline facility in Beaumont, Texas which is classified as held-for-sale as of December 31,
2015 and included as other current assets. Also included is a prepaid premium on insurance programs we entered into in the normal course of business after the
separation. Prior to the spin, Chemours participated in DuPont insurance programs.
Current Liabilities
(Dollars
in
millions)
Accounts payable
Short-term borrowings and current portion of long-term debt
Other accrued liabilities
Total current liabilities
December 31,
2015
December 31,
2014
$
$
973 $
39
454
1,466 $
1,046
—
352
1,398
Accounts payable decreased compared to December 31, 2014 due to timing of payments to vendors, and lower purchases and capital expenditures. Short-term
borrowings and current portion of long-term debt primarily reflects our financing transactions with our unconsolidated affiliate and the required quarterly
installment payments on our senior secured term loan. We had no comparable financing transactions in 2014. Other accrued liabilities increased due to employee
separation accruals related to 2015 actions and accrued interest on debt issued in 2015.
Financing Transactions
On May 12, 2015, Chemours entered into certain financing transactions in connection with the Distribution and in recognition of the assets contributed to us by
DuPont in anticipation of the separation. The proceeds from the financing transactions were used to fund a cash distribution to DuPont of $3.4 billion and a
distribution in kind of Notes with an aggregate principal amount of $507 million. See Note 18 to the Consolidated Financial Statements for further discussion of
these transactions.
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The credit agreement provided for a seven-year senior secured term loan (the Term Loan Facility) in a principal amount of $1.5 billion repayable in equal quarterly
installments at a rate of one percent of the original principal amount per year, with the balance payable on the final maturity date. The Term Loan Facility was
issued with a $7 million original issue discount and bears variable interest rate subject to a floor of 3.75 %. The proceeds from the Term Loan Facility were used to
fund a portion of the distribution to DuPont, along with related fees and expenses.
Prior to an amendment in February 2016, the credit agreement also provided for a five-year $1.0 billion senior secured revolving credit facility (the Revolving
Credit Facility). In February 2016, an amendment to the Revolving Credit Facility reduced the capacity to $750 million beginning in the first quarter of 2016 and
amended certain covenants (see Debt Covenant discussion included herein). The proceeds of any loans made under the Revolving Credit Facility can be used to
finance capital expenditures, acquisitions, working capital needs and for other general corporate purposes. Availability under the Revolving Credit Facility is
subject to certain covenant limitations. At December 31, 2015 , the facility was undrawn with a borrowing availability of approximately $625 million . We had
$129 million letters of credit issued and outstanding under this facility at December 31, 2015 .
Chemours' obligations under the Term Loan Facility and Revolving Credit Facility (collectively, the Senior Secured Credit Facilities) are guaranteed on a senior
secured basis by all of its material domestic subsidiaries, subject to certain agreed upon exceptions. The obligations under the Senior Secured Credit Facilities are
also, subject to certain agreed upon exceptions, secured by a first priority lien on substantially all of Chemours and its material wholly-owned domestic
subsidiaries' assets, including 100 percent of the stock of domestic subsidiaries and 65 percent of the stock of certain foreign subsidiaries.
Additionally, on May 12, 2015, Chemours issued approximately $2,503 million aggregate principal of senior unsecured notes (the Notes) in a private placement.
The 2023 notes (the 2023 Notes) with an aggregate principal amount of $1,350 million bear interest at a rate of 6.625% per annum and will mature on May 15,
2023 with all principal paid at maturity. The 2025 notes (the 2025 Notes) with an aggregate principal amount of $750 million bear interest at a rate of 7.000% per
annum and will mature on May 15, 2025 with all principal paid at maturity. The 2023 euro notes (the Euro Notes) with an aggregate principal amount of €360
million bear interest at a rate of 6.125% per annum and will mature on May 15, 2023 with all principal paid at maturity. Interest on the Notes is payable semi-
annually in cash in arrears on May 15 and November 15 of each year, which commenced on November 15, 2015. The Notes were offered in the U.S. to persons
reasonably believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act, and outside the U.S. to non-U.S. persons in reliance on
Regulation S under the Securities Act. Chemours is required to register the Notes with the SEC within 465 days. If Chemours fails to do so, it would be required to
pay additional interest at a rate of 0.25% for the first 90 days following a registration default and additional 0.25% per annum with respect to each subsequent 90-
day period, up to a maximum rate of 0.50%, until the registration requirements are met. Application is also expected to be made to the Irish Stock Exchange for the
approval of listing particulars in relation to the Euro Notes prior to the first anniversary of the issue date of the Euro Notes.
Each series of Notes is or will be fully and unconditionally guaranteed, jointly and severally, by Chemours’ existing and future domestic subsidiaries that guarantee
(the Guarantors) the Senior Secured Credit Facilities or that guarantee other indebtedness of Chemours or any guarantor in an aggregate principal amount in excess
of $75 million (the Guarantees). The Notes are unsecured and unsubordinated obligations of Chemours. The Guarantees are unsecured and unsubordinated
obligations of the Guarantors. The Notes rank equally in right of payment to all of Chemours’ existing and future unsecured unsubordinated debt and senior in right
of payment to all of Chemours’ existing and future debt that is by its terms expressly subordinated in right of payment to the Notes. The Notes are subordinated to
indebtedness under the Senior Secured Credit Facilities as well as any future secured debt to the extent of the value of the assets securing such debt. Chemours’ is
obligated to offer to purchase the Notes at a price of (a) 101 percent of their principal amount, together with accrued and unpaid interest, if any, to the date of
purchase, upon the occurrence of certain change of control events and (b) 100 percent of their principal amount, together with accrued and unpaid interest, if any,
to the date of purchase, with the proceeds from certain asset dispositions. These restrictions and prohibitions are subject to certain qualifications and exceptions set
forth in the Indenture, including without limitation, reinvestment rights with respect to the proceeds of asset dispositions. Chemours is permitted to redeem some or
all of the 2023 Notes and Euro Notes by paying a “make-whole” premium prior to May 15, 2018. Chemours also may redeem some or all of the 2023 Notes and
Euro Notes on or after May 15, 2018 and thereafter at specified redemption prices. Chemours also may redeem some or all of the 2025 Notes on or after May 15,
2020 at specified redemption prices.
Debt Covenants
Chemours is subject to certain debt covenants that, among other things, limit Chemours and certain of Chemours’ subsidiaries to incur indebtedness, pay dividends
or make other distributions, prepay, redeem or repurchase certain debt, make loans and investments, sell assets, incur liens, enter into transactions with affiliates
and consolidate or merge. These covenants are subject to a number of exceptions and qualifications set forth in the respective agreements.
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In the third quarter of 2015, Chemours and its Revolving Credit Facility lenders entered into an amendment to the Revolving Credit Facility that strengthens
Chemours' financial position by providing enhanced liquidity to implement the Transformation Plan. The amendment modified the consolidated EBITDA
definition in the covenant calculation to include pro forma benefits of announced cost reduction initiatives. Further, in the first quarter of 2016, Chemours and its
Revolving Credit Facility lenders entered into a second amendment to the Revolving Credit Facility that (a) replaced the total net leverage ratio financial covenant
with a senior secured net leverage ratio; (b) reduced the minimum required levels of interest expense coverage ratio covenant; (c) increased the limits and time
horizon for inclusion of pro forma benefits of announced cost reduction initiatives into consolidated EBITDA definition for the purposes of calculating financial
covenants; and (d) reduced the revolver availability from $1.0 billion to $750 million. These changes provide further flexibility to Chemours to sustain a
potentially prolonged downturn in the business and enhance its liquidity to implement the transformation plan.
The credit agreement contains financial covenants which, solely with respect to the Revolving Credit Facility as amended, require Chemours not to exceed a
maximum senior secured net leverage ratio of 3.50 to 1.00 and to maintain a minimum interest coverage ratio of 1.75 to 1.00 until December 31, 2016. In addition,
the credit agreement contains customary affirmative and negative covenants that, among other things, limit or restrict Chemours and its subsidiaries' ability, subject
to certain exceptions, to incur liens, merge, consolidate or sell, transfer or lease assets, make investments, pay dividends, transact with subsidiaries and incur
indebtedness. The credit agreement also contains customary representations and warranties and events of default.
The Senior Secured Credit Facilities and the Notes contain events of default customary for these types of financings, including cross default and cross acceleration
provisions to material indebtedness of Chemours. Chemours was in compliance with its debt covenants as of December 31, 2015 .
Maturities
There are no debt maturities in any of the next seven years, except, in accordance with the credit agreement, Chemours has required principal payments related to
the Term Loan Facility of $15 million in each year from 2016 to 2020. Debt maturities related to the Term Loan Facility and the Notes in 2021 and beyond will be
$3,913 million .
Supplier Financing
Chemours has entered into a global paying services agreement with a financial institution. Under this agreement, the financial institution acts as the paying agent
for Chemours with respect to accounts payable due to our suppliers who elect to participate in the program. The agreement allows our suppliers to sell their
receivables to the financial institution at the discretion of both parties on terms that are negotiated between them. Our obligations to our suppliers, including the
amounts due and scheduled payment dates, are not impacted by our suppliers' decisions to sell their receivables under this program. At December 31, 2015 , the
payment instructions from Chemours were $171 million, of which certain suppliers have elected to be paid early in an aggregate amount of $161 million. The
available capacity under this program can vary based on the number of investors participating in this program at any point of time.
Capital Expenditures
Our operations are capital intensive, requiring ongoing investment to upgrade or enhance existing operations and to meet environmental and operational
regulations. Our capital requirements have consisted, and are expected to continue to consist, primarily of:
•
•
•
ongoing capital expenditures, such as those required to maintain equipment reliability, the integrity and safety of our manufacturing sites and to comply
with environmental regulations;
investments in our existing facilities to help support introduction of new products and de-bottleneck to expand capacity and grow our business; and
investment in projects to reduce future operating costs and enhance productivity.
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The following table summarizes ongoing and expansion capital expenditures (which includes environmental capital expenditures), as well as expenditures related
to our separation from DuPont, for the years ended December 31, 2015 , 2014 and 2013 :
(Dollars
in
millions)
Titanium Technologies
Fluoroproducts
Chemical Solutions
Corporate & Other
Total Capital Expenditures 1
Year Ended December 31,
2015
2014
2013
255
$
365
$
142
117
5
519
$
133
106
—
604
$
290
96
52
—
438
$
$
1 Includes separation-related capital expenditures of $66 million and $21 million for the years ended December 31, 2015 and 2014, respectively.
The decrease in our ongoing capital expenditures in 2015 compared with 2014 is due to lower spending in 2015 as we finish the expansion of our Altamira
production facility. Capital expenditures as a percentage of our net sales were 9% , 9% and 6% for the years ended December 31, 2015 , 2014 and 2013,
respectively.
We expect our capital expenditures, excluding separation-related spending, to decline in 2016 and 2017 as we finish the expansion of our Altamira production
facility, reaching a more normalized level of approximately $350 million per year beginning in 2017. For further detail related to our environmental capital
expenditures, please see the Environmental Matters section of this MD&A.
Contractual Obligations
Information related to the Company's significant contractual obligations is summarized in the table below.
(Dollars
in
millions)
Long-term debt obligations 1
Interest payments on long-term debt obligations 1
Operating leases
Purchase obligations 2
Raw material obligations
Utility obligations
Other
Total purchase obligations
Other liabilities
Workers’ compensation
Asset retirement obligations
Environmental remediation
Legal settlements
Employee separation costs
Other 3
Total other liabilities
Total contractual obligations 4
Total at December
31, 2015
2016
2017 - 2018
2019 - 2020
2021 and
Beyond
Payments Due In
$
3,988 $
1,702
346
1,358
119
169
1,646
38
42
290
20
99
61
550
$
8,232 $
15 $
223
84
30 $
444
135
30 $
442
89
3,913
593
38
111
26
60
197
6
1
67
7
76
20
168
35
73
276
17
4
89
4
23
4
156
18
26
200
7
—
62
4
—
5
923
40
10
973
8
37
72
5
—
32
177
696
$
141
1,026
$
78
839
$
154
5,671
1 To calculate payments due for principal and interest, we assumed that interest rates, foreign currency exchange rates, and outstanding borrowings under credit facilities
were unchanged from December 31, 2015 through maturity.
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2 Represents enforceable and legally binding agreements to purchase goods or services that specify fixed or minimum quantities; fixed minimum or variable price
provisions; and the approximate timing of the agreement.
3 Includes expected contributions and benefits payments in excess of plan assets to be made to fund our pension and other long-term employee benefit plans. Actual
payments will depend on several factors, including investment performance and discount rates, and may also be affected by changes in applicable local requirements. See
Note 21 to the Consolidated Financial Statements for additional information.
4 Due to uncertainty regarding the completion of tax audits and possible outcomes, we are unable to determine the timing of payments related to unrecognized tax benefits.
See Note 8 to the Consolidated Financial Statements for additional information.
Off Balance Sheet Arrangements
Information with respect to Chemours' guarantees is included in Note 19 to the Consolidated Financial Statements. Historically, Chemours has not made significant
payments to satisfy guarantee obligations; however, Chemours believes it has the financial resources to satisfy these guarantees in the event required.
Recent Accounting Pronouncements
See Note 3 to the Consolidated Financial Statements included elsewhere in this Annual Report for a summary of recent accounting pronouncements.
Critical Accounting Policies and Estimates
Chemours' significant accounting policies are more fully described in Note 3 to the Consolidated Financial Statements. Management believes that the application
of these policies on a consistent basis enables the Company to provide the users of the financial statements with useful and reliable information about the
Company's operating results and financial condition.
The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts, including, but not limited to, receivable and inventory valuations, impairment of tangible and intangible assets, long-term employee benefit
obligations, income taxes, restructuring liabilities, environmental matters, and litigation. Management's estimates are based on historical experience, facts and
circumstances available at the time and various other assumptions that are believed to be reasonable. The Company reviews these matters and reflects changes in
estimates as appropriate. Management believes that the following represents some of the more critical judgment areas in the applications of the Company's
accounting policies which could have a material effect on the Company's financial position, liquidity or results of operations.
Goodwill
The excess of the purchase price over the estimated fair value of the net assets acquired, including identified intangibles, in a business combination is recorded as
goodwill. Goodwill is tested for impairment at least annually on October 1; however, impairment tests are performed more frequently when events or changes in
circumstances indicate that the asset may be impaired. Impairment exists when carrying value exceeds fair value. Goodwill is evaluated for impairment at the
reporting unit level.
Evaluating goodwill for impairment is a two-step process. In the first step, Chemours compares the carrying value of net assets to the fair value of the related
operations. Chemours estimates the fair value of its reporting units using the income approach based on the present value of future cash flows. The factors
considered in determining the cash flows include: 1) macroeconomic conditions; 2) industry and market considerations; 3) costs of raw materials, labor or other
costs having a negative effect on earnings and cash flows; 4) overall financial performance; and 5) other relevant entity-specific events. If the fair value is
determined to be less than the carrying value, a second step is performed to compute the amount of the impairment.
As a result of the tests performed in 2015, there was no impairment of the Company's goodwill as the fair value substantially exceeded the carrying values for each
reporting units tested, except for our Sulfur reporting unit in the Chemicals Solutions segment.
Goodwill of $25 million was allocated to our Sulfur reporting unit. We performed the two-step impairment test for the Sulfur reporting unit and determined that the
implied fair value of its goodwill was lower than its carrying value, resulting in a full impairment of the reporting unit's goodwill. As a result, Chemours recorded a
$25 million pre-tax impairment charge for goodwill during the year ended December 31, 2015 in the Chemicals Solutions segment. See Note 13 to the
Consolidated Financial Statements for further discussions.
The determination of whether or not goodwill is impaired involves a significant level of judgment in the assumptions underlying the approach used to determine
the estimated fair value of our reporting units. Chemours believes that assumptions and rates used
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in the impairment assessment are reasonable. However, these assumptions are judgmental and variations in any assumptions could result in materially different
calculations of fair value. The Company will continue to evaluate goodwill on an annual basis as of October 1, and whenever events or changes in circumstances,
such as significant adverse changes in operating results, market conditions or changes in management’s business strategy, indicate that there may be a probable
indicator of impairment. It is possible that the assumptions used by management related to the evaluation may change or that actual results may vary significantly
from management’s estimates.
Valuation
of
Assets
The assets and liabilities of acquired businesses are measured at their estimated fair values at the dates of acquisition. The determination and allocation of fair
value to the assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment,
including estimates based on historical information, current market data and future expectations. The principal assumptions utilized in Chemours’ valuation
methodologies include revenue growth rates, operating margin estimates, royalty rates and discount rates. Although the estimates are deemed reasonable by
management based on information available at the dates of acquisition, those estimates are inherently uncertain.
Assessment of potential impairment of property, plant and equipment, other intangible assets and investments in affiliates is an integral part of Chemours’ normal
ongoing review of operations. Chemours evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances indicate
that the carrying value may not be recoverable. For purposes of recognition or measurement of an impairment loss, the assessment is performed on the asset or
asset group at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. To determine the
level at which the assessment is performed, Chemours considers factors such as revenue dependency, shared costs and the extent of vertical integration. The
carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from the use and eventual disposition of asset or asset
group are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived
asset. The fair value methodology used is an estimate of fair market value which is made based on prices of similar assets or other valuation methodologies
including present value techniques. Long-lived assets to be disposed of other than by sale are classified as held for use until their disposal. Long-lived assets to be
disposed of by sale are classified as held for sale and are reported at the lower of carrying amount or fair market value less cost to sell. Depreciation is discontinued
for long-lived assets classified as held for sale.
Testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management’s best estimates at a particular point
in time. The dynamic economic environments in which Chemours’ segments operate, and key economic and business assumptions with respect to projected selling
prices, market growth and inflation rates, can significantly affect the outcome of impairment tests. Estimates based on these assumptions may differ significantly
from actual results. Changes in factors and assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of
impairments, as well as the time in which such impairments are recognized. In addition, Chemours continually reviews its diverse portfolio of assets to ensure they
are achieving their greatest potential and are aligned with Chemours’ growth strategy. Strategic decisions involving a particular group of assets may trigger an
assessment of the recoverability of the related assets. Such an assessment could result in impairment losses. During 2015, Chemours recorded a pre-tax asset
impairment charge in the Chemical Solutions segment of $45 million to adjust the carrying value of its asset group to fair value. See Notes 6 and 12 to the
Consolidated Financial Statements for additional details related to this charge.
Environmental
Liabilities
and
Expenditures
Chemours accrues for remediation activities when it is probable that a liability has been incurred and a reasonable estimate of the liability can be made.
Environmental liabilities and expenditures included in the Consolidated Financial Statements include claims for matters that are liabilities of DuPont and its
subsidiaries, that Chemours may be required to indemnify pursuant to the separation-related agreements executed prior to the Distribution. Accruals for
environmental matters are recorded in cost of goods sold when it is probable that a liability has been incurred and the amount of the liability can be reasonably
estimated. Accrued liabilities do not include claims against third parties and are not discounted.
Costs related to environmental remediation are charged to expense in the period incurred. Other environmental costs are also charged to expense in the period
incurred, unless they increase the value of the property or reduce or prevent contamination from future operations, in which case, they are capitalized and
amortized.
Litigation
Chemours accrues for litigation matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Litigation
liabilities and expenditures included in the Consolidated Financial Statements represent
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litigation matters that are liabilities of DuPont and its subsidiaries, that Chemours may be required to indemnify pursuant to the separation-related agreements
executed prior to the Distribution. Disputes between Chemours and DuPont may arise with respect to indemnification of these matters, including disputes based on
matters of law or contract interpretation. If and to the extent these disputes arise, they could materially adversely affect Chemours' results of operations. Legal costs
such as outside counsel fees and expenses are charged to expense in the period services are received.
Income
Taxes
Prior to July 1, 2015, income taxes as presented herein attribute current and deferred income taxes of DuPont to Chemours’ stand-alone financial statements in a
manner that is systematic, rational, and consistent with the asset and liability method prescribed by Accounting Standards Codification 740, Income
Taxes
(ASC
740), issued by the Financial Accounting Standards Board (FASB). Accordingly, Chemours’ income tax provision was prepared following the separate return
method. The separate return method applies ASC 740 to the stand-alone financial statements of each member of the consolidated group as if the group member
were a separate taxpayer and a stand-alone enterprise. As a result, actual tax transactions included in the Consolidated Financial Statements of DuPont may not be
included in the separate combined financial statements of Chemours. Similarly, the tax treatment of certain items reflected in the separate combined financial
statements of Chemours may not be reflected in the Consolidated Financial Statements and tax returns of DuPont; therefore, such items as net operating losses,
credit carryforwards, and valuation allowances may exist in the stand-alone financial statements that may or may not exist in DuPont’s Consolidated Financial
Statements.
The taxable income (loss) of various Chemours entities, prior to July 1, 2015, was included in DuPont’s consolidated tax returns, where applicable, in jurisdictions
around the world. As such, separate income tax returns were not prepared for many Chemours’ entities. Consequently, income taxes currently payable are deemed
to have been remitted to DuPont, in cash, in the period the liability arose and income taxes currently receivable are deemed to have been received from DuPont in
the period that a refund could have been recognized by Chemours had Chemours been a separate taxpay er. As described in Note 2 to the Consolidated Financial
Statements, the operations comprising Chemours are in various legal entities which have no direct ownership relationship. Consequently, no provision has been
made for income taxes on unremitted earnings of subsidiaries and affiliates. Unremitted earnings of subsidiaries outside the U.S. are considered to be reinvested
indefinitely.
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent
the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents
income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and
tax basis of Chemours’ assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to
reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. In evaluating the ability to realize deferred tax assets, the Company
relies on, in order of increasing subjectivity, taxable income in prior carryback years, the future reversals of existing taxable temporary differences, tax planning
strategies and forecasted taxable income using historical and projected future operating results.
The breadth of Chemours’ operations and the global complexity of tax regulations require assessments of uncertainties and judgments in estimating the taxes that
Chemours will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions,
outcomes of tax litigation and resolution of disputes arising from federal, state and international tax audits in the normal course of business. A liability for
unrecognized tax benefits is recorded when management concludes that the likelihood of sustaining such positions upon examination by taxing authorities is less
than "more likely than not." It is Chemours’ policy to include accrued interest related to unrecognized tax benefits in other income, net and income tax related
penalties to be included in the provision for income taxes.
Employee
Benefits
Prior to separation, certain of Chemours' employees participated in defined benefit pension and other post-employment benefit plans (the Plans) sponsored by
DuPont and accounted for by DuPont in accordance with accounting guidance for defined benefit pension and other post-employment benefit plans. Substantially
all expenses related to these plans were allocated in shared entities and reported within costs of goods sold, selling, general and administrative expenses and
research and development expense in the Consolidated Statements of Operations. Chemours considered all plans to be part of a multi-employer plan with DuPont
prior to January 1, 2015.
In connection with the spin-off, Chemours retained the existing Netherlands pension plan and an agreement was executed in 2015 to ensure continuance of the plan
for both DuPont and Chemours employees and retirees. As a result of that agreement, Chemours now accounts for the Netherlands plan as a multiple employer
plan. Additionally, in 2015, Chemours formed new pension plans
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in Taiwan, Germany, Belgium, Switzerland, Japan, Korea and Mexico that mirror the plans historically operated by DuPont in these countries. The new plans are
accounted for under the single employer method.
The amounts recognized in the Consolidated Financial Statements related to pension and other long-term employee benefits plans are determined from actuarial
valuations. Inherent in these valuations are assumptions including expected return on plan assets, discount rates at which liabilities could have been settled, rate of
increase in future compensation levels, and mortality rates. These assumptions are updated annually and are disclosed in Note 21 to the Consolidated Financial
Statements. In accordance with U.S. GAAP, actual results that differed from the assumptions are accumulated and amortized over future periods and therefore,
affect expense recognized and obligations recorded in future periods.
Chemours generally utilizes discount rates that are developed by matching the expected cash flows of each benefit plan to various yield curves constructed from a
portfolio of high quality, fixed income instruments provided by the plan’s actuary as of the measurement date. As of December 31, 2015, the weighted average
discount rate was 2.39% .
Expected long-term rate of return on assets is determined by performing a detailed analysis of historical and expected returns based on the strategic asset allocation
of the underlying asset class applicable to each country. We also consider our historical experience with the pension fund asset performance. The expected long-
term rate of return is an assumption and not what is expected to be earned in any one particular year. The weighted-average long-term rate of return assumption
used for determining net periodic pension expense for 2015 was 7.21% .
The estimated impact of a 50 basis point increase of the discount rate to the net periodic benefit cost for 2015 would result in an increase of $5 million , while the
impact of a 50 basis point decrease of the discount rate would result in an increase of approximately $7 million . The estimated impact of a 50 basis point increase
of the expected return on asset assumption on the net periodic benefit cost for 2015 would result in a decrease of approximately $6 million , while the impact of a
50 basis point decrease would result in an increase of $6 million .
Environmental Matters
Environmental
Expenses
Environmental expenses charged to current operations include environmental operating costs and the increase in the remediation accrual, if any, during the period
reported. As a result of its operations, Chemours incurs costs for pollution abatement activities including waste collection and disposal, installation and
maintenance of air pollution controls and wastewater treatment, emissions testing and monitoring and obtaining permits. Chemours also incurs costs for
environmental-related research and development activities including environmental field and treatment studies as well as toxicity and degradation testing to
evaluate the environmental impact of products and raw materials. Management expects that such expenses in 2016 will be comparable to 2015 and, therefore, does
not believe that year over year changes, if any, in environmental expenses charged to current operations will have a material impact on Chemours’ financial
position, liquidity or results of operations.
Remediation
Accrual
Annual expenditures in the near future are not expected to vary significantly from the range of such expenditures incurred during the past few years. Longer term,
expenditures are subject to considerable uncertainty and may fluctuate significantly. Changes in the remediation accrual are summarized below.
(Dollars
in
millions)
Balance at December 31, 2013
Remediation Payments
Increase in Remediation Accrual
Balance at December 31, 2014
Remediation Payments
Increase in Remediation accrual
Balance at December 31, 2015
$
$
274
(38)
59
295
(43)
38
290
Chemours is also subject to contingencies pursuant to environmental laws and regulations that in the future may require further action to correct the effects on the
environment of prior disposal practices or releases of chemical or petroleum substances by
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Chemours or other parties. Chemours accrues for environmental remediation activities consistent with the policy as described in Note 3 to the Consolidated
Financial Statements. Much of this liability results from the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to
as Superfund), the Resource Conservation and Recovery Act (RCRA) and similar state and global laws. These laws require certain investigative, remediation and
restoration activities at sites where Chemours conducts or once conducted operations or at sites where Chemours-generated waste was disposed. The accrual also
includes estimated costs related to a number of sites identified for which it is probable that environmental remediation will be required, but which are not currently
the subject of enforcement activities.
As of December 31, 2015 , Chemours, through DuPont, has been notified of potential liability under the CERCLA or similar state laws at about 174 sites around
the U.S., including approximately 22 sites for which Chemours does not believe it has liability based on current information. Active remediation is under way at
approximately 53 of these sites. In addition, at December 31, 2015 , liability at approximately 66 sites, has been resolved either by completing remedial actions
with other Potentially Responsible Parties (PRPs) or participating in "de minimis buyouts" with other PRPs whose waste, like Chemours’, represented only a small
fraction of the total waste present at a site. The Company received notice of potential liability at two new sites through December 31, 2015 . During 2014,
Chemours received notice of three new sites.
At December 31, 2015 , the Consolidated Balance Sheet included a liability of $290 million relating to these matters which, in management’s opinion, is
appropriate based on existing facts and circumstances. The average time-frame over which the accrued or presently unrecognized amounts may be paid, based on
past history, is estimated to be 15 to 20 years. Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated
costs, depend on the mix of unique site characteristics, evolving remediation technologies, diverse regulatory agencies and enforcement policies, as well as the
presence or absence of other potentially responsible parties. In addition, Chemours, through DuPont, has limited available information for certain sites or is in the
early stages of discussions with regulators. For these sites in particular there may be considerable variability between the remediation activities that are currently
being undertaken or planned, as reflected in the liability recorded at December 31, 2015 , and the ultimate actions that could be required.
Therefore, considerable uncertainty exists with respect to environmental remediation costs and, under adverse changes in circumstances, the potential liability may
range up to approximately $611 million above the amount accrued at December 31, 2015 . Except for Pompton Lakes, which is discussed further below, based on
existing facts and circumstances, management does not believe that any loss, in excess of amounts accrued, related to remediation activities at any individual site
will have a material impact on the financial position, liquidity or results of operations of Chemours.
Pompton
Lakes
The environmental remediation accrual is $87 million at December 31, 2015 related to activities at Chemours’ site in Pompton Lakes, New Jersey. Management
believes that it is reasonably possible that remediation activities at this site could range up to $119 million , including previously accrued amounts. This could have
a material impact on the liquidity of Chemours in the period recognized. However, management does not believe this would have a material adverse effect on
Chemours’ combined financial position, liquidity or results of operations. During the twentieth century, blasting caps, fuses and related materials were
manufactured at Pompton Lakes. Operating activities at the site ceased in the mid 1990’s. Primary contaminants in the soil and sediments are lead and mercury.
Ground water contaminants include volatile organic compounds.
Under the authority of the EPA and the New Jersey Department of Environmental Protection, remedial actions at the site are focused on investigating and cleaning
up the area. Ground water monitoring at the site is ongoing and Chemours, through DuPont, has installed and continues to install vapor mitigation systems at
residences within the ground water plume. In addition, Chemours is further assessing ground water conditions. In June 2015, the EPA issued a modification to the
site's RCRA permit that requires Chemours to dredge mercury contamination from a 36 acre area of the lake and remove sediment from 2 other areas of the lake
near the shoreline. Chemours expects to spend about $50 million over the next two to three years, which is included in the remediation accrual at December 31,
2015 , in connection with remediation activities at Pompton Lakes, including activities related to the EPA’s proposed plan. The Company expects these activities to
begin sometime on or after mid-2016; however initiation of this work in the field is dependent upon timing of agency approval of permits and implementation
plans.
Environmental
Capital
Expenditures
As of December 31, 2015 , Chemours spent approximately $27 million on environmental capital projects either required by law or necessary to meet Chemours’
internal environmental goals. Chemours currently estimates expenditures for environmental-related capital projects to be approximately $17 million in 2016, which
is included in our estimate of overall capital expenditures discussed in the Liquidity and Capital Resources section of this MD&A. In the U.S., additional capital
expenditures are expected to be required over the next decade for treatment, storage and disposal facilities for solid and hazardous waste and for compliance
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with the Clean Air Act (CAA). Until all CAA regulatory requirements are established and known, considerable uncertainty will remain regarding estimates for
future capital expenditures. However, management does not believe that the costs to comply with these requirements will have a material impact on the financial
position or liquidity of Chemours.
Climate
Change
Chemours believes that climate change is an important global issue that presents risks and opportunities. Chemours continuously evaluates opportunities for
existing and new product and service offerings in light of the anticipated demands of a low-carbon economy. Our new, low GWP products are anticipated to reduce
greenhouse gas content of refrigerants by 90 million metric tons carbon dioxide equivalent in the U.S. and greater than 300 million metric tons worldwide by 2025.
We continue to monitor legislative and regulatory developments to control or limit greenhouse gas (GHG) emissions. Depending on the scope and content, changes
could affect Chemours’ energy source and supply choices, as well as increase the cost of energy and raw materials derived from fossil fuels. Such efforts are also
expected to provide the business community with greater certainty for the regulatory future, help guide investment decisions, and drive growth in demand for low-
carbon and energy-efficient products, technologies, and services. Similarly, demand is expected to grow for products that facilitate adaptation to a changing
climate.
Several of Chemours facilities in the EU are regulated under the EU Emissions Trading Scheme. In 2015, China announced a national cap and trade program to be
implemented in 2017. Similarly, South Korea implemented its emission trading scheme on January 1, 2015. In the EU, U.S. and Japan, policy efforts to reduce the
GHG emissions associated with gases used in refrigeration and air conditioning are creating market opportunities for new solutions to lower GHG emissions.
In May 2010, the EPA launched a phased-in scheme to regulate GHG emissions first from large stationary sources under the existing Clean Air Act permitting
requirements administered by state and local authorities. As a result, large capital investments may be required to install Best Available Control Technology on
major new or modified sources of GHG emissions. This type of GHG emissions regulation by the EPA, in the absence of or in addition to federal legislation, could
result in more costly, less efficient facility-by-facility controls versus a federal program that incorporates policies that provide an economic balance that does not
severely distort markets. In 2015, the EPA promulgated regulations for carbon dioxide emissions from new and reconstructed/modified Electric Generating Units
(EGUs) and for carbon dioxide emissions from existing EGUs that would be based on individual state emission reduction programs. If these or similar regulations
are enacted, they may affect the long term price and supply of electricity and natural gas and demand for products that contribute to energy efficiency and
renewable energy. Chemours, as well as our suppliers and customers, could be in a competitive disadvantage by the added costs of complying with a variety of
state-specific requirements. However, the precise impact of these regulations is uncertain due to the anticipated legal challenges to this regulatory approach.
PFOA
See discussion under “PFOA” in Note 19 to the Consolidated Financial Statements.
Non-GAAP Financial Measures
We prepare our financial statements in accordance with U.S. GAAP. To supplement our financial information presented in accordance with U.S. GAAP, we
provide the following non-GAAP financial measures, “Adjusted EBITDA”, “Adjusted Net Income” and "Free Cash Flow", in order to clarify and provide investors
with a better understanding of the company’s performance when analyzing changes in our underlying business between reporting periods and provide for greater
transparency with respect to supplemental information used by management in its financial and operational decision making. We utilize Adjusted EBITDA as the
primary measure of segment profitability used by our Chief Operating Decision Maker (CODM).
Adjusted EBITDA is defined as income (loss) before taxes excluding the following:
•
•
•
•
•
interest expense, depreciation and amortization,
non-operating pension and other postretirement employee benefit costs,
exchange gains (losses),
employee separation, asset-related charges and other charges, net,
asset impairments,
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•
•
gains (losses) on sale of business or assets, and
other items not considered indicative of our ongoing operational performance and expected to occur infrequently.
Adjusted net income (loss) is defined as net (loss) income attributable to Chemours adjusted for items excluded from Adjusted EBITDA except interest expense,
depreciation and amortization, and certain (benefit from) provision for income taxes. Free Cash Flow is defined as cash provided by (used in) operating activities
less cash used for purchases of property, plant and equipment as disclosed in the Consolidated Statements of Cash Flows.
We believe the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is a useful financial analysis tool
that can assist investors in assessing the company’s operating performance and underlying prospects. This analysis should not be considered in isolation or as a
substitute for analysis of our results as reported under GAAP. In the future, we may incur expenses similar to those eliminated in this presentation. Our
presentation of Adjusted EBITDA, Adjusted Net Income and Free Cash Flow should not be construed as an inference that our future results will be unaffected by
unusual or infrequently occurring items. The non-GAAP financial measures we use may be defined differently from measures with the same or similar names used
by other companies. This analysis, as well as the other information provide in this annual report on Form 10-K, should be read in conjunction with the company’s
financial statements and notes thereto included in this report.
The following table reconciles Adjusted EBITDA and Adjusted Net Income discussed above to net income (loss) attributable to Chemours for the periods
presented:
(Dollars
in
millions)
Year Ended December 31,
2015
2014
2013
Net (loss) income attributable to Chemours
$
(90) $
400 $
Non-operating pension and other postretirement employee benefit costs
Exchange losses (gains)
Restructuring charges
Asset impairments
Losses (gains) on sale of business or assets
Transaction, legal and other charges
Benefit from income taxes relating to reconciling items 1
Adjusted Net Income
Net income attributable to noncontrolling interests
Interest expense
Depreciation and amortization
All remaining provision for income taxes 1
Adjusted EBITDA
Weighted average number of common shares outstanding - Basic 2
Weighted average number of common shares outstanding - Diluted 2
Adjusted earnings per common share, basic
Adjusted earnings per common share, diluted
(Loss) earnings per common share, basic
(Loss) earnings per common share, diluted 3
$
$
$
$
$
(3)
(19)
285
73
9
17
(129)
143
—
132
267
31
22
66
21
—
(40)
—
(16)
453
1
—
257
165
573 $
876 $
423
114
31
2
—
—
—
(53)
517
1
—
261
205
984
180,993,623
181,737,587
180,966,833
180,966,833
180,966,833
180,966,833
0.79 $
0.79 $
(0.50) $
(0.50) $
2.50 $
2.50 $
2.21 $
2.21 $
2.86
2.86
2.34
2.34
1 Total of (benefit from) provision for income taxes reconciles to the amount reported in the consolidated statement of operations for the years ended December 31, 2015,
2014 and 2013.
2 On July 1, 2015, DuPont distributed 180,966,833 shares of Chemours' common stock to holders of its common stock. All earnings per common share amounts for the
years ended December 31, 2014 and 2013 were calculated using the shares distributed on July 1, 2015.
3 Diluted earnings per share considers the impact of potentially dilutive shares except in periods in which there is a loss because the inclusion of the potential common
shares would have an antidilutive effect.
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to changes in foreign currency exchange rates because of our global operations. As a result, we have assets, liabilities and cash flows denominated
in a variety of foreign currencies. We are also exposed to changes in the prices of certain commodities that we use in production. Changes in these rates and
commodity prices may have an impact on future cash flow and earnings. We manage these risks through normal operating and financing activities and, when
deemed appropriate, through the use of derivative financial instruments. We do not enter into derivative financial instruments for trading or speculative purposes.
By using derivative instruments, we are subject to credit and market risk. The fair market value of the derivative instruments is determined by using valuation
models whose inputs are derived using market observable inputs, and reflects the asset or liability position as of the end of each reporting period. When the fair
value of a derivative contract is positive, the counterparty owes us, thus creating a receivable risk for us. We are exposed to counterparty credit risk in the event of
non-performance by counterparties to our derivative agreements. We minimize counterparty credit (or repayment) risk by entering into transactions with major
financial institutions of investment grade credit rating.
Foreign Currency Risks
Fluctuations in the value of the U.S. dollar compared to foreign currencies may impact Chemours' earnings. In 2015, Chemours entered into foreign currency
forward contracts to minimize volatility in earnings related to the foreign exchange gains and losses resulting from remeasuring monetary assets and liabilities that
Chemours holds which are denominated in non-functional currencies. These derivatives are stand-alone and have not been designated as a hedge. For the year
ended December 31, 2015, we had open foreign exchange forward contracts with an aggregate notional U.S. dollar equivalent of $ 288 million, the fair value of
which amounted to less than $1 million of net unrealized gain.
Prior to 2015, Chemours participated in DuPont's foreign currency hedging program to reduce earnings volatility associated with remeasurement of foreign
currency denominated net monetary assets. DuPont formally documented the hedge relationships, including identification of the hedging instruments and hedged
items, the risk management objectives and strategies for undertaking the hedge transactions, and the methodologies used to assess effectiveness and measure
ineffectiveness. Realized gains and losses on derivative instruments of DuPont were allocated by DuPont to Chemours based on projected exposure. Chemours
recognized its allocable share of the gains and losses on DuPont's derivative financial instruments in earnings when the forecasted purchases occurred for natural
gas hedges and when the forecasted sales occurred for foreign currency hedges. The impact of Chemours' participation in the foreign currency hedging program
was a gain of $4 million in 2014.
In July 2015, Chemours designated its €360 million Euro notes as a hedge of its net investments in certain of its international subsidiaries that use the Euro as
functional currency in order to reduce the volatility in stockholders’ equity caused by the changes in foreign currency exchange rates of the Euro with respect to the
U.S. dollar. Chemours uses the spot method to measure the effectiveness of the net investment hedge. Under this method, for each reporting period, the change in
the carrying value of the Euro notes due to remeasurement of the effective portion is reported in accumulated other comprehensive loss in the Consolidated
Balance Sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in other income, net in the Consolidated Statements
of Operations. Chemours evaluates the effectiveness of its net investment hedge at the beginning of every quarter.
See Note 20 to the Consolidated Financial Statements for further information on derivative financial instruments.
Sensitivity Analysis
In a hypothetical adverse change in the market prices or rates that existed at December 31, 2015, a 10% increase in the U.S. dollar against our outstanding hedged
contracts on foreign currencies, such as Chinese yuan, British pound, and Brazilian real, at the currency exchange rates as of December 31, 2015 would increase
our net gain by approximately $3 million, while a 10% depreciation of the U.S. Dollar against the same hedged currencies would decrease our net gain by
approximately $4 million.
Chemours' risk management programs and the underlying exposure are closely correlated, such that the potential loss in value for the risk management portfolio
described above would be largely offset by change in the value of the underlying exposure. See Note 20 to the Consolidated Financial Statements for further
information.
Concentration of Credit Risk
Chemours' sales are not dependent on any single customer. As of December 31, 2015 and December 31, 2014 , no one individual customer balance represented
more than five percent of Chemours' total outstanding receivables balance. Credit risk associated with Chemours' receivables balance is representative of the
geographic, industry and customer diversity associated with Chemours'
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global businesses. As a result of our customer base being widely dispersed, we do not believe our exposure to credit-related losses related to our business as of
December 31, 2015 and December 31, 2014 was material.
Chemours also maintains strong credit controls in evaluating and granting customer credit. As a result, it may require that customers provide some type of financial
guarantee in certain circumstances. Length of terms for customer credit varies by industry and region.
Commodities Risk
A portion of our products and raw materials are commodities whose prices fluctuate as market supply and demand fundamentals change. Accordingly, product
margins and the level of our profitability tend to fluctuate with the changes in the business cycle. Chemours tries to protect against such instability through various
business strategies. These include provisions in sales contracts allowing us to pass on higher raw material costs through timely price increases and formula price
contracts to transfer or share commodity price risk. Chemours did not have any commodity derivative instruments in place as of December 31, 2015 or
December 31, 2014 .
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this Item are included herein, commencing on page F-1 of this Annual Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The company maintains a system of disclosure controls and procedures to give reasonable assurance that information required to be disclosed in the Company's
reports filed or submitted under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission. These controls and procedures also give reasonable assurance that information
required to be disclosed in such reports is accumulated and communicated to management to allow timely decisions regarding required disclosures.
As of December 31, 2015 , the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO), together with management, conducted an evaluation
of the effectiveness of the Company's disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation,
the CEO and CFO concluded that these disclosure controls and procedures are effective at the reasonable assurance level referenced above.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company's internal control over financial reporting that occurred during the quarter ended December 31, 2015 that have
materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Management Reporting on Internal Control over Financial Reporting
This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the
Company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
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Item 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Except for information concerning executive officers, which is included in Part I of this annual report under the caption "Executive Officers of the Registrant", the
information about the Company’s directors required by this Item 10 is contained under the caption “Proposal 1 - Election of Directors” in the Company’s definitive
proxy statement for its 2016 annual meeting of stockholders (2016 Proxy Statement) which the Company anticipates filing with the Securities and Exchange
Commission within 120 days after the end of the fiscal year to which this report relates, and is incorporated herein by reference.
Information regarding the Company’s Audit Committee, code of ethics, and compliance with Section 16(a) of the Exchange Act is contained in the 2016 Proxy
Statement under the captions “Corporate Governance,” “Board Structure and Committee Composition” and “Section 16(a) Beneficial Ownership Reporting
Compliance” and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is contained in the 2016 Proxy Statement under the captions “Executive Compensation”, “Director Compensation”,
“Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 and not otherwise set forth below is contained in the 2016 Proxy Statement under the caption “Security Ownership of Certain
Beneficial Owners and Management” and is incorporated herein by reference.
Securities authorized for issuance under equity compensation plans as of December 31, 2015
(shares
in
thousands,
except
per
share)
Plan Category
Equity compensation plans approved by security
holders
Number of securities to be issued
upon Exercise of Outstanding
Options, Warrants and Rights
Weighted-Average Exercise Price of
Outstanding Options, Warrants and
Rights 2
Number of Securities Remaining
Available for Future Issuance Under
Equity Compensation Plans 3
10,633
1
$
14.66
11,773
1 Includes stock-settled time-vested and performance-based restricted stock units granted and stock units deferred under the company's Equity and Incentive Plan.
2 Represents the weighted-average exercise price of the outstanding stock options only; the outstanding stock-settled time-vested and performance-based restricted stock units and deferred
stock units are not included in this calculation.
3 Reflects shares available pursuant to the issuance of stock options, restricted stock, restricted stock units or other stock-based awards under the Equity and Incentive Plan approved by our
former parent prior to separation while the Company was a wholly-owned subsidiary of DuPont (see Note 22 to Consolidated Financial Statements for further information). The
maximum number of shares of stock reserved for the grant or settlement of awards under the plan shall be 13,500,000 plus the number of shares of stock of the converted DuPont
awards. The aggregate number of shares of stock granted during any fiscal year to any single individual (other than with regard to converted DuPont awards) shall not exceed 3,000,000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by Item 13 is contained in the 2016 Proxy Statement under the captions “Director Independence” and “Certain Relationships and
Transactions” and is incorporated herein by reference.
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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 is contained in the 2016 Proxy Statement under the captions “Proposal 4 - Ratification of Selection of Independent Registered
Public Accounting Firm”, “Fees Paid to Independent Registered Public Accounting Firm” and “Audit Committee's Pre-Approval Policies and Procedures” and is
incorporated herein by reference.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
See the Index to the Consolidated Financial Statements on page F-1 of this report.
(a)(2) Financial Statement Schedules
See Schedule II listed below.
Schedule II - Valuation and Qualifying Accounts
(Dollars
in
millions)
Accounts Receivable - Allowance for Doubtful Accounts
Balance at beginning of period
Additions charged to expenses
Deductions from reserves 1
Currency translation
Balance at end of period
Deferred Tax Assets - Valuation Allowance
Balance at beginning of period
Net charges to income tax expense
Release of valuation allowance 2
Balance at end of period
Year Ended December 31,
2015
2014
2013
$
$
$
$
4 $
1
—
(1)
4 $
36 $
—
(36)
— $
7 $
1
(4)
—
4 $
26 $
10
—
36 $
6
2
(1)
—
7
19
7
—
26
1 Bad debt write-offs were less than $1 for the year ended December 31, 2015 .
2 Release of valuation allowance during 2015 was primarily related to the tax attributes retained by DuPont pursuant to the tax matters agreement.
(a)(3) Exhibits
See the Exhibit List beginning on page 61 of this report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
The CHEMOURS COMPANY
(Registrant)
Date:
February 25, 2016
By:
/s/ Mark E. Newman
Mark E. Newman
Senior Vice President and Chief Financial Officer
(As Duly Authorized Officer and Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the
capacities and on the dates indicated:
Signature
Title(s)
/s/ Mark P. Vergnano
Mark P. Vergnano
/s/ Mark E. Newman
Mark E. Newman
/s/ Amy P. Trojanowski
Amy P. Trojanowski
/s/ Richard H. Brown
Richard H. Brown
/s/ Curtis V. Anastasio
Curtis V. Anastasio
/s/ Bradley J. Bell
Bradley J. Bell
/s/ Mary B. Cranston
Mary B. Cranston
/s/ Curtis J. Crawford
Curtis J. Crawford
/s/ Dawn L. Farrell
Dawn L. Farrell
/s/ Stephen D. Newlin
Stephen D. Newlin
President, Chief Executive Officer, and Director
(Principal Executive Officer)
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Vice President and Controller
(Principal Accounting Officer)
Date
February 25, 2016
February 25, 2016
February 25, 2016
Chairman of the Board
February 25, 2016
Director
Director
Director
Director
Director
Director
63
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
Table of Contents
Exhibit
Number
EXHIBIT INDEX
Description
2.1
3.1
3.2
10.1
10.2
10.3
10.4
10.5*
10.6*
10.7
10.8
10.9
10.10
Separation Agreement by and between E. I. du Pont de Nemours and Company and the Chemours Company (incorporated by reference to
Exhibit 2 to the Company's Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
Company’s Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Current Report
on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
Company’s Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K, as
filed with the U.S. Securities and Exchange Commission on July 1, 2015).
Second Amended and Restated Transition Services Agreement by and between E. I. du Pont de Nemours and Company and The Chemours
Company (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, as filed with the U.S. Securities and
Exchange Commission on July 1, 2015).
Tax Matters Agreement by and between E. I. du Pont de Nemours and Company and The Chemours Company (incorporated by reference
to Exhibit 10.2 to the Company's Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1,
2015).
Employee Matters Agreement by and between E. I. du Pont de Nemours and Company and The Chemours Company (incorporated by
reference to Exhibit 10.3 to the Company's Current Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on
July 1, 2015).
Third Amended and Restated Intellectual Property Cross-License Agreement by and among E. I. du Pont de Nemours and Company, The
Chemours Company FC and The Chemours Company TT, LLC (incorporated by reference to Exhibit 10.4 to the Company's Current
Report on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
Offer of Employment Letter between Mark E. Newman and E. I. du Pont de Nemours and Company, dated October 14, 2014 (incorporated
by reference to Exhibit 10.5 to the Company’s Amendment No. 2 to Form 10, as filed with the U.S. Securities and Exchange Commission
on April 21, 2015).
Offer of Employment Letter between Elizabeth Albright and E. I. du Pont de Nemours and Company, dated September 25, 2014
(incorporated by reference to Exhibit 10.6 to the Company’s Amendment No. 2 to Form 10, as filed with the U.S. Securities and Exchange
Commission on April 21, 2015).
Indenture, dated May 12, 2015 by and among The Chemours Company, The Guarantors party thereto and U.S. Bank National Association,
as Trustee, Elavon Financial Services Limited, as Registrar and Transfer Agent for the Euro Notes (incorporated by reference to
Exhibit 10.7 to the Company’s Amendment No. 3 to Form 10, as filed with the U.S. Securities and Exchange Commission on May 13,
2015).
First Supplemental Indenture, dated May 12, 2015, by and among The Chemours Company, the Guarantors party thereto and U.S. Bank
National Association, as Trustee (incorporated by reference to Exhibit 10.8 to the Company’s Amendment No. 3 to Form 10, as filed with
the U.S. Securities and Exchange Commission on May 13, 2015).
Second Supplemental Indenture, dated May 12, 2015, by and among The Chemours Company, the Guarantors party thereto and U.S. Bank
National Association, as Trustee (incorporated by reference to Exhibit 10.9 to the Company’s Amendment No. 3 to Form 10, as filed with
the U.S. Securities and Exchange Commission on May 13, 2015).
Third Supplemental Indenture, dated May 12, 2015, by and among The Chemours Company, the Guarantors party thereto and U.S. Bank
National Association, as Trustee, Elavon Financial Services Limited, UK Branch, as Paying Agent for the Euro Notes and Elavon
Financial Services Limited, as Registrar and Transfer Agent for the Euro Notes (incorporated by reference to Exhibit 10.10 to the
Company’s Amendment No. 3 to Form 10, as filed with the U.S. Securities and Exchange Commission on May 13, 2015).
64
Table of Contents
Exhibit
Number
10.11
10.12
10.13
10.14(1)
10.14(2)
10.14(3)
10.15
10.16*
10.17*
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24*
Description
6.625% Notes due 2023 (included in Exhibit 10.8).
7.000% Notes due 2025 (included in Exhibit 10.9).
6.125% Notes due 2023 (included in Exhibit 10.10).
Credit Agreement, dated May 12, 2015 by and among The Chemours Company, certain Guarantors party thereto and JPMorgan Chase
Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.14 to the Company’s Amendment No. 3 to Form 10, as filed
with the U.S. Securities and Exchange Commission on May 13, 2015).
Amendment No. 1 to the Credit Agreement among The Chemours Company, the lenders and issuing banks thereto and JPMorgan Chase
Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed
with the U.S. Securities and Exchange Commission on September 28, 2015).
Amendment No. 2 to the Credit Agreement dated February 19, 2016 by and among The Chemours Company, the lenders and issuing banks
thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Item 10.1 to the Company’s Current Report
on Form 8-K, as filed with the U.S. Securities and Exchange Commission on February 23, 2016).
Registration Rights Agreement, dated May 12, 2015, by and among The Chemours Company, certain Guarantors party thereto and Credit
Suisse Securities (USA) LLC and J.P. Morgan Securities LLC, as representatives of the Dollar purchases and Credit Suisse Securities
(USA) LLC and J.P Morgan Securities plc, as representatives of the Euro Purchasers (incorporated by reference to Exhibit 10.15 to the
company’s Amendment No. 3 to Form 10, as filed with the U.S. Securities and Exchange Commission on May 13, 2015).
The Chemours Company Equity and Incentive Plan (incorporated by reference to Exhibit 4.1 to the Company's Form S-8 (File No. 333-
205391, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
The Chemours Company Retirement Savings Restoration Plan (incorporated by reference to Exhibit 10.5 to the Company's Current Report
on Form 8-K, as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
The Chemours Company Management Deferred Compensation Plan (incorporated by reference to Exhibit 4.1 to the Company's Form S-8
(File No. 333-205393), as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
The Chemours Company Stock Accumulation and Deferred Compensation Plan for Directors (incorporated by reference to Exhibit 4.1 to
the Company's Form S-8 (File No. 333-205392), as filed with the U.S. Securities and Exchange Commission on July 1, 2015).
The Chemours Company Senior Executive Severance Plan (incorporated by reference to Exhibit 10.20 to the company’s Amendment No.
3 to Form 10, as filed with the U.S. Securities and Exchange Commission on May 13, 2015).
Form of Option Award Terms under the Company’s Equity Incentive Plan (incorporated by reference to Exhibit 10.21 to the company’s
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).
Form of Restricted Stock Unit Terms under the Company’s Equity Incentive Plan (incorporated by reference to Exhibit 10.22 to the
company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).
Form of Stock Appreciation Right Terms under the Company’s Equity Incentive Plan (incorporated by reference to Exhibit 10.23 to the
company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).
Form of Restricted Stock Unit Terms for Non-Employee Directors under the Company’s Equity Incentive Plan (incorporated by reference
to Exhibit 10.24 to the company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015).
65
Table of Contents
Exhibit
Number
10.25*
10.26*
10.27*
10.28*
10.30
21
23
31.1
31.2
32.1
32.2
Form of Performance-Based Restricted Stock Unit Terms for August 2015 (incorporated by reference to Exhibit 10.25 to the company’s
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015).
Description
Form of Performance Share Unit Award Terms under the Company’s Equity Incentive Plan.
Form of Cash Performance Award Terms under the Company’s Equity Incentive Plan.
Form of Indemnification Agreement for officers and directors.
Letter Agreement dated January 28, 2016 by and between The Chemours Company and E. I. du Pont de Nemours and Company
(incorporated by reference to Item 10.2 to the Company’s Current Report on Form 8-K, as filed with the U.S. Securities and Exchange
Commission on February 23, 2016).
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Executive Officer.
Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Financial Officer.
Section 1350 Certification of the company’s Principal Executive Officer. The information contained in this Exhibit shall not be deemed
filed with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the registrant under
the Securities Act of 1933, as amended.
Section 1350 Certification of the company’s Principal Financial Officer. The information contained in this Exhibit shall not be deemed
filed with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the registrant under
the Securities Act of 1933, as amended.
95
Mine Safety Disclosures
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
______________________________________
*Management contract or compensatory plan or arrangement.
66
Table of Contents
The Chemours Company
Index to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2015, 2014 and 2013
Consolidated Balance Sheets as of December 31, 2015 and 2014
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013
Notes to the Consolidated Financial Statements
F- 1
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
Table of Contents
To the Board of Directors and Shareholders of The Chemours Company:
Report of Independent Registered Public Accounting Firm
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position
of The Chemours Company and its subsidiaries at December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion the
financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 25, 2016
F- 2
Table of Contents
The Chemours Company
Consolidated Statements of Operations
(Dollars
in
millions,
except
per
share)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expense
Research and development expense
Employee separation and asset related charges, net
Goodwill impairment
Total expenses
Equity in earnings of affiliates
Interest expense, net
Other income, net
(Loss) income before income taxes
(Benefit from) provision for income taxes
Net (loss) income
Less: Net income attributable to noncontrolling interests
Net (loss) income attributable to Chemours
Per share data
Basic (loss) earnings per share of common stock
Diluted (loss) earnings per share of common stock
Dividends per share of common stock
Year Ended December 31,
2015
2014
2013
$
5,717
4,762
955
632
97
333
25
1,087
22
(132)
54
(188)
(98)
(90)
—
$
6,432
5,072
1,360
685
143
21
—
849
20
—
19
550
149
401
1
(90)
$
400
$
6,859
5,395
1,464
768
164
2
—
934
22
—
24
576
152
424
1
423
$
$
(0.50)
(0.50)
0.58
1
$
1
$
2.21
2.21
N/A
2.34 1
2.34 1
N/A
$
$
$
$
$
1 On July 1, 2015, E. I. du Pont de Nemours and Company distributed 180,966,833 shares of Chemours' common stock to holders of its common stock. Basic and diluted (loss)
earnings per common share for the years ended December 31, 2014 and 2013 were calculated using the shares distributed on July 1, 2015. Refer to Note 9 for information
regarding the calculation of basic and diluted earnings per share.
See accompanying notes to the consolidated financial statements.
F- 3
Table of Contents
Net (loss) income
Other comprehensive (loss) income:
Unrealized gain on net investment hedge
Cumulative translation adjustments
Defined benefit plans, net:
Net loss
Prior service credit
Effect of foreign exchange rates
Reclassifications to net income 1 :
Amortization of prior service cost
Amortization of loss
Defined benefit plans, net
Other comprehensive loss
Comprehensive (loss) income
Less: Comprehensive income attributable to
noncontrolling interests
Comprehensive (loss) income attributable
to Chemours
The Chemours Company
Consolidated Statements of Comprehensive (Loss) Income
(Dollars
in
millions)
Year Ended December 31,
Pre-Tax
$
(188) $
After-Tax Pre-Tax
(90) $
98 $
550 $
(149) $
576 $
(152) $
After-Tax Pre-Tax
401 $
After-Tax
424
2014
Tax
2013
Tax
2015
Tax
8
(304)
(11)
24
33
4
16
66
(230)
(418)
—
—
1
(4)
(8)
—
(3)
(14)
(14)
84
8
(304)
(10)
20
25
4
13
52
(244)
(334)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
550
(149)
401
576
(152)
424
—
—
—
1
—
1
1
—
1
$
(418) $
84 $
(334) $
549 $
(149) $
400 $
575 $
(152) $
423
1 These other comprehensive income (loss) components are included in the computation of net periodic benefit costs. Refer to Note 21 for further information.
See accompanying notes to the consolidated financial statements.
F- 4
The Chemours Company
Consolidated Balance Sheets
(Dollars
in
millions,
except
per
share
amount)
December 31,
2015
December 31,
2014
Table of Contents
Assets
Current assets:
Cash
Accounts and notes receivable - trade, net
Inventories
Prepaid expenses and other
Total current assets
Property, plant and equipment
Less: Accumulated depreciation
Net property, plant and equipment
Goodwill
Other intangible assets, net
Investments in affiliates
Other assets
Total assets
Liabilities and equity
Current liabilities:
Accounts payable
Short-term borrowings and current maturities of long-term debt
Other accrued liabilities
Total current liabilities
Long-term debt
Other liabilities
Deferred income taxes
Total liabilities
Commitments and contingent liabilities
Equity
Common stock (par value $0.01 per share; 810,000,000 shares authorized; 181,069,751 shares issued and
outstanding as of December 31, 2015)
Additional paid-in capital
DuPont Company Net Investment, prior to separation
Accumulated deficit
Accumulated other comprehensive (loss) income
Total Chemours stockholders' equity
Noncontrolling interests
Total equity
Total liabilities and equity
See accompanying notes to the consolidated financial statements.
F- 5
$
$
$
$
$
$
366
859
972
104
2,301
9,015
(5,838)
3,177
166
10
136
508
6,298
973
39
454
1,466
3,915
553
234
6,168
2
775
—
(115)
(536)
126
4
130
$
6,298
$
—
846
1,052
43
1,941
9,282
(5,974)
3,308
198
11
124
377
5,959
1,046
—
352
1,398
—
464
424
2,286
—
—
3,650
—
19
3,669
4
3,673
5,959
Table of Contents
Balance at
December 31, 2012
Net income
Net transfers from
DuPont
Balance at
December 31, 2013
Net income
Net transfers from
DuPont
Balance at
December 31, 2014
Net income
Other comprehensive
loss
Issuance of Common
Stock at separation
Common Stock
issued -
compensation plans
Establishment of
pension plans, net
and related
accumulated other
comprehensive
income (loss)
Dividends declared
Non-cash debt
exchange
Cash provided at
separation by
DuPont
Net transfers from
DuPont, net of
elimination of
predecessor balances
Stock-based
compensation
expense
Balance at
December 31, 2015
The Chemours Company
Consolidated Statements of Stockholders' Equity
Years ended December 31, 2015 , 2014 and 2013
(Dollars
in
millions)
Common Stock
Shares
Amount
DuPont
Company Net
Investment
Additional
Paid-In
Capital
Accumulated Other
Comprehensive
Income (Loss)
Noncontrolling
Interests
Accumulated
Deficit
Total
— $
—
— $
—
3,146 $
423
— $
—
19
$
—
2 $
1
— $
3,167
—
424
—
—
—
—
—
—
—
180,966,833
—
—
—
—
—
—
—
2
(374)
3,195
400
55
3,650
25
—
—
—
—
—
—
—
—
—
(2)
—
19
—
—
19
—
(244)
—
—
3
1
—
4
—
—
—
—
(374)
—
—
3,217
401
—
55
—
(115)
3,673
(90)
—
(244)
—
—
—
102,918
—
—
—
—
—
—
—
—
—
—
—
—
268
(100)
(507)
—
(5)
—
(311)
—
—
—
—
—
—
—
(43)
(105)
—
(507)
—
—
247
—
—
—
—
247
—
—
(3,583)
769
—
—
—
13
—
—
—
(2,814)
—
—
13
181,069,751 $
2 $
— $
775
$
(536)
$
4 $
(115)
$
130
See accompanying notes to the consolidated financial statements.
F- 6
Year Ended December 31,
2015
2014
2013
$
(90) $
401 $
Table of Contents
The Chemours Company
Consolidated Statements of Cash Flows
(Dollars
in
millions)
Operating activities
Net (loss) income
Adjustments to reconcile net (loss) income to cash provided by operating activities:
Depreciation and amortization
Amortization of deferred financing costs and issuance discount
Other operating charges and credits, net
Loss (gain) on sale of assets and businesses
Equity in earnings of affiliates, net of dividends received of $23, $19 and $19
Deferred tax benefit
Asset related charges
(Increase) decrease in operating assets:
Accounts and notes receivable - trade, net
Inventories and other operating assets
Increase (decrease) in operating liabilities:
Accounts payable and other operating liabilities
Cash provided by operating activities
Investing activities
Purchases of property, plant and equipment
Proceeds from sales of assets, net
Foreign exchange contract settlements
Investment in affiliates
Other investing activities
Cash used for investing activities
Financing activities
Proceeds from issuance of debt, net
Debt repayments
Dividends paid
Debt issuance costs
Cash provided at separation by DuPont
Net transfers (to) from DuPont
Cash provided by (used for) financing activities
Effect of exchange rate changes on cash
Increase in cash
Cash at beginning of year
Cash at end of year
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest, net of amounts capitalized
Income taxes, net of refunds
Non-cash change in property, plant and equipment included in accounts payable
267
8
7
9
—
(198)
206
(64)
19
18
182
(519)
12
42
(32)
—
(497)
3,491
(10)
(105)
(79)
247
(2,857)
687
(6)
366
—
366 $
103 $
53 $
45 $
$
$
$
$
See accompanying notes to the consolidated financial statements.
F- 7
424
261
—
13
(7)
(1)
(14)
—
(37)
(75)
234
798
257
—
18
(40)
1
(22)
—
4
(29)
(85)
505
(604)
(438)
32
—
(8)
20
14
—
—
—
(560)
(424)
—
—
—
—
—
55
55
—
—
—
— $
— $
— $
(11) $
—
—
—
—
—
(374)
(374)
—
—
—
—
—
—
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Note 1. Background and Description of the Business
The Chemours Company (Chemours or the Company) delivers customized solutions with a wide range of industrial and specialty chemical products for markets
including plastics and coatings, refrigeration and air conditioning, general industrial, mining and oil refining. Principal products include titanium dioxide (TiO 2 ),
refrigerants, industrial fluoropolymer resins, sodium cyanide, sulfuric acid and aniline. Chemours consists of three reportable segments: Titanium Technologies,
Fluoroproducts and Chemical Solutions.
Chemours is globally operated with manufacturing facilities, sales centers, administrative offices and warehouses located throughout the world. Chemours'
operations are primarily located in the United States (U.S.), Canada, Mexico, Brazil, the Netherlands, Belgium, China, Taiwan, Japan, Switzerland, Singapore,
Hong Kong, India, the United Kingdom, and France. As of December 31, 2015 , Chemours consists of 35 production facilities globally, five dedicated to Titanium
Technologies, 16 dedicated to Fluoroproducts, 13 dedicated to Chemical Solutions and one that supports multiple Chemours segments.
Effective prior to the opening of trading on the New York Stock Exchange (NYSE) on July 1, 2015 (the Distribution Date), E. I. du Pont de Nemours and
Company (DuPont) completed the previously announced separation of the businesses comprising DuPont’s Performance Chemicals reporting segment, and certain
other assets and liabilities, into Chemours, a separate and distinct public company. The separation was completed by way of a distribution of all of the then-
outstanding shares of common stock of Chemours through a dividend in kind of Chemours’ common stock (par value $0.01 ) to holders of DuPont common stock
(par value $0.30 ) as of the close of business on June 23, 2015 (the Record Date) (the transaction referred to herein as the Distribution).
On the Distribution Date, each holder of DuPont's common stock received one share of Chemours' common stock for every five shares of DuPont's common stock
held on the Record Date. The spin-off was completed pursuant to a separation agreement and other agreements with DuPont related to the spin-off, including an
employee matters agreement, a tax matters agreement, a transition services agreement and an intellectual property cross-license agreement. These agreements
govern the relationship between Chemours and DuPont following the spin-off and provided for the allocation of various assets, liabilities, rights and obligations.
These agreements also include arrangements for transition services to be provided by DuPont to Chemours.
Unless the context otherwise requires, references in these Notes to the Consolidated Financial Statements to "we," "us," "our," "Chemours" and the "Company"
refer to The Chemours Company and its consolidated subsidiaries after giving effect to the Distribution.
Note 2. Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the U.S. (GAAP). In the
opinion of management, all adjustments considered necessary for a fair statement of the results have been included. Certain reclassifications of prior year's data
have been made to conform to the current presentation, primarily relating to the adoption of Accounting Standards Update (ASU) No. 2015-17, "Income Taxes
(Topic 740) - Balance Sheet Classification of Deferred Taxes" (see recent accounting pronouncements in Note 3 for further information). Unless otherwise stated,
references to years relate to Chemours' fiscal years. The notes that follow are an integral part of the Consolidated Financial Statements.
Chemours did not operate as a separate, stand-alone entity for the full period covered by Consolidated Financial Statements. Prior to our spin-off on July 1, 2015,
Chemours operations were included in DuPont's financial results in different legal forms, including but not limited to wholly-owned subsidiaries for which
Chemours was the sole business, components of legal entities in which Chemours operated in conjunction with other DuPont businesses and a majority owned joint
venture. For periods prior to July 1, 2015, the accompanying Consolidated Financial Statements have been prepared from DuPont’s historical accounting records
and are presented on a stand-alone basis as if the business operations had been conducted independently from DuPont. Prior to January 1, 2015, aside from a
Japanese entity that is a dual-resident for U.S. federal income tax purposes, there was no direct ownership relationship among all the other various legal entities
comprising Chemours. Prior to July 1, 2015, DuPont and its subsidiaries’ net investments in these operations is shown in lieu of Stockholder’s Equity in the
Consolidated Financial Statements. The Consolidated Financial Statements include the historical operations, assets and liabilities of the legal entities that are
considered to comprise the Chemours business, including certain environmental remediation and litigation obligations of DuPont and its subsidiaries that
Chemours may be required to indemnify pursuant to the separation-related agreements executed prior to the spin-off.
F- 8
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
All of the allocations and estimates in the Consolidated Financial Statements prior to July 1, 2015 are based on assumptions that management believes are
reasonable. However, the Consolidated Financial Statements included herein may not be indicative of the financial position, results of operations and cash flows of
Chemours in the future or if Chemours had been a separate, stand-alone entity during the periods presented.
The net transfers from DuPont on the Consolidated Statements of Stockholder's Equity include a non-cash contribution from DuPont of $109 for the year ended
December 31, 2015 . This non-cash contribution occurred during physical separation activities at shared production facilities in the U.S. prior to the spin-off and
certain assets identified at separation. It was determined that assets previously managed by other DuPont businesses would be transferred to and managed by
Chemours.
Note 3. Summary of Significant Accounting Policies
These Consolidated Financial Statements have been prepared in accordance with GAAP. The significant accounting policies described below, together with the
other notes that follow, are an integral part of the Consolidated Financial Statements.
Preparation of Financial Statements
The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported
amounts of revenues and expenses, including allocations of costs as discussed above, during the reporting period. Management’s estimates are based on historical
experience, facts and circumstances available at the time and various other assumptions that we believe are reasonable. Actual results could differ from those
estimates.
Principles of Consolidation and Combination
The Consolidated Financial Statements include the accounts Chemours and its subsidiaries, and entities in which a controlling interest is maintained. For those
consolidated subsidiaries in which the Company's ownership is less than 100%, the outside shareholders' interests are shown as noncontrolling interests.
Investments in companies in which Chemours, directly or indirectly, owns 20% to 50% of the voting stock and has the ability to exercise significant influence over
operating and financial policies of the investee are accounting for using the equity method of accounting. As a result, Chemours' share of the earnings or losses of
such equity affiliates is included in the accompanying Consolidated Statements of Operations and our share of these companies' stockholders' equity is included in
the accompanying Consolidated Balance Sheets.
The financial statements for the periods prior to our spin-off on July 1, 2015 include the combined assets, liabilities, revenues, and expenses of Chemours. We
eliminated all intercompany accounts and transactions in the preparation of the accompanying Consolidated and Combined Financial Statements.
Revenue Recognition
Revenue is recognized when the earnings process is complete. Revenue for product sales is recognized when products are shipped to the customer in accordance
with the terms of the agreement, when title and risk of loss have been transferred, collectability is reasonably assured and pricing is fixed or determinable. Revenue
associated with advance payments are recorded as deferred revenue and are recognized as shipments are made and title, ownership and risk of loss pass to the
customer. Accruals are made for sales returns and other allowances based on historical experience. Cash sales incentives are accounted for as a reduction in sales
and noncash sales incentives are recorded as a charge to cost of goods sold at the time the revenue or selling expense, depending on the nature of the incentive, is
recorded. Amounts billed to customers for shipping and handling fees are included in net sales and costs incurred by Chemours for the delivery of goods are
classified as cost of goods sold in the Consolidated Statements of Operations. Taxes on revenue-producing transactions are excluded from net sales. Licensing and
royalty income is recognized in accordance with agreed upon terms, when performance obligations are satisfied, the amount is fixed or determinable and
collectability is reasonably assured.
Cash and Cash Equivalents
Cash and cash equivalents generally include cash, time deposits or highly liquid investments with original maturities of three months or less.
Prior to the spin-off, Chemours participated in DuPont’s centralized cash management and financing programs (see Note 4 for additional information).
F- 9
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Receivables and Allowance for Doubtful Accounts
Receivables are recognized net of an allowance for doubtful accounts. The allowance for doubtful accounts reflects the best estimate of losses inherent in
Chemours’ accounts receivable portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other available
evidence. Accounts receivable are written off when management determines that they are uncollectible.
Inventories
Chemours’ inventories are valued at the lower of cost or market. Inventories held at substantially all U.S. locations are valued using the last-in, first-out (LIFO)
method. Inventories held outside the U.S. are determined by the average cost method. Elements of cost in inventories include raw materials, direct labor, and
manufacturing overhead. Stores and supplies are valued at cost or market, whichever is lower; cost is generally determined by the average cost method.
Approximately 61% and 52% of inventory is on a LIFO basis as of December 31, 2015 and 2014, respectively. The remainder is accounted for using the average
cost method.
Property, Plant and Equipment
Property, plant and equipment is carried at cost and is depreciated using the straight-line method. Property, plant and equipment placed in service prior to 1995 is
depreciated under the sum-of-the-years’ digits method or other substantially similar methods. Substantially all equipment and buildings are depreciated over useful
lives ranging from 15 to 25 years . Capitalizable costs associated with computer software for internal use are amortized on a straight-line basis over five to seven
years . When assets are surrendered, retired, sold or otherwise disposed of, their gross carrying values and related accumulated depreciation are removed from the
balance sheet and included in determining gain or loss on such disposals.
Repair and maintenance costs that materially add to the value of the asset or prolong its useful life are capitalized and depreciated based on the extension to the
useful life. Capitalized repair and maintenance costs are recorded on the Consolidated Balance Sheets in other assets.
Direct Financing Type Leases
Certain of Chemours’ facilities are located on land owned by third parties. The plant and equipment built on this land is constructed by, owned, and operated by
Chemours for the exclusive benefit of the third party landlord. The useful lives of the equipment are generally shorter than the lease term, or there exists a purchase
option for the third party to acquire the equipment at the end of the lease term. Based on an analysis of the underlying agreements, management has determined
that these agreements and property represent a direct financing type lease, whereby Chemours is the lessor of its equipment to the third party landlords. As such,
the related plant and equipment are reported as leases receivable. The current portion is included in accounts and notes receivable - trade, net (see Note 10) and the
non-current portion is included in other assets (see Note 14) in the Consolidated Balance Sheets. The equipment has zero net book value within property, plant and
equipment.
Goodwill and Other Intangible Assets
The excess of the purchase price over the estimated fair value of the net assets acquired, including identified intangibles, is recorded as goodwill. Goodwill is tested
for impairment annually on October 1; however, these tests are performed more frequently when events or changes in circumstances indicate that the asset may be
impaired. Impairment exists when carrying value exceeds fair value. Goodwill is evaluated for impairment at the reporting unit level.
Evaluating goodwill for impairment is a two-step process. In the first step, Chemours compares the carrying value of net assets to the fair value of the related
operations. Chemours’ methodology for estimating the fair value of its reporting units is using the income approach based on the present value of future cash
flows. The factors considered in determining the cash flows include: 1) macroeconomic conditions; 2) industry and market considerations; 3) costs of raw
materials, labor or other costs having a negative effect on earnings and cash flows; 4) overall financial performance; and 5) other relevant entity-specific events. If
the fair value is determined to be less than the carrying value, a second step is performed to compute the amount of the impairment.
Definite-lived intangible assets, such as purchased and licensed technology, patents, trademarks, and customer lists are amortized over their estimated useful lives,
generally for periods ranging from five to 20 years . The reasonableness of the useful lives of these assets is continually evaluated.
F- 10
Table of Contents
Impairment of Long-Lived Assets
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Chemours evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances indicate the carrying value may not be
recoverable. For purposes of recognition or measurement of an impairment loss, the assessment is performed on the asset or asset group at the lowest level for
which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. To determine the level at which the assessment is
performed, Chemours considers factors such as revenue dependency, shared costs and the extent of vertical integration.
The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from the use and eventual disposition of an asset
or asset group are separately identifiable and are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value
exceeds the fair value of the long-lived asset. The fair value methodology used is an estimate of fair market value which is made based on prices of similar assets
or other valuation methodologies including present value techniques. Long-lived assets to be disposed of other than by sale are classified as held for use until their
disposal. Long-lived assets to be disposed of by sale are classified as held for sale and are reported at the lower of carrying amount or fair market value less cost to
sell. Depreciation is discontinued for long-lived assets classified as held for sale.
Research and Development
Research and development costs are expensed as incurred. Research and development expenses include costs (primarily consisting of employee costs, materials,
contract services, research agreements, and other external spend) relating to the discovery and development of new products, enhancement of existing products and
regulatory approval of new and existing products.
Environmental Liabilities and Expenditures
Chemours accrues for remediation activities when it is probable that a liability has been incurred and a reasonable estimate of the liability can be made.
Environmental liabilities and expenditures included in the Consolidated Financial Statements include claims for matters that are liabilities of DuPont and its
subsidiaries, that Chemours may be required to indemnify pursuant to the separation-related agreements executed prior to the spin-off. Accruals for environmental
matters are recorded in cost of goods sold when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Accrued
liabilities do not include claims against third parties and are not discounted.
Costs related to environmental remediation are charged to expense in the period incurred. Other environmental costs are also charged to expense in the period
incurred, unless they increase the value of the property or reduce or prevent contamination from future operations, in which case they are capitalized and
amortized.
Asset Retirement Obligations
Chemours records asset retirement obligations at fair value at the time the liability is incurred. Fair value is measured using expected future cash outflows
discounted at Chemours’ credit-adjusted risk-free interest rate, which are considered level 3 inputs. Accretion expense is recognized as an operating expense
classified within cost of goods sold on the Consolidated Income Statements using the credit-adjusted risk-free interest rate in effect when the liability was
recognized. The associated asset retirement obligations are capitalized as part of the carrying amount of the long-lived asset and depreciated over the estimated
remaining useful life of the asset, generally for periods ranging from two to 25 years .
Litigation
Chemours accrues for litigation matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Litigation
liabilities and expenditures included in the Consolidated Financial Statements represent litigation matters that are liabilities of DuPont and its subsidiaries, that
Chemours may be required to indemnify pursuant to the separation-related agreements executed prior to the spin-off. Legal costs such as outside counsel fees and
expenses are charged to expense in the period services are received.
Insurance
Chemours insures certain risks where permitted by law or regulation, including workers' compensation, vehicle liability and employee related benefits. Liabilities
associated with these risks are estimated in part by considering historical claims experience, demographic factors and other actuarial assumptions. For other risks,
the Company uses a combination of insurance and self-insurance, reflecting comprehensive reviews of relevant risks. A receivable for an insurance recovery is
generally recognized when the loss has occurred and collection is considered probable.
F- 11
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Prior to the spin-off, Chemours was a participant in DuPont’s self-insurance program where permitted by law or regulation, including workers’ compensation,
vehicle liability and employee related benefits. Liabilities associated with these risks are estimated in part by considering historical claims experience,
demographic factors, and other actuarial assumptions. For other risks, a combination of insurance and self-insurance is used, reflecting comprehensive reviews of
relevant risks. The annual cost was allocated to all of the participating businesses using methodologies deemed reasonable by management. All obligations
pursuant to these plans have historically been obligations of DuPont. As such, these obligations were not included in the Consolidated Balance Sheets, with the
exception of self-insurance liabilities related to workers compensation, vehicle liability and employee related benefits.
Defined Benefit Plans
We have defined benefit plans covering certain of our employees outside the U.S., which are generally required by local regulations. The benefits, which primarily
relate to pension, are accrued over the employees’ service periods. We use actuarial methods and assumptions in the valuation of defined benefit obligations and
the determination of net periodic pension income or expense. Differences between actual and expected results or changes in the value of defined benefit obligations
and plan assets, if any, are not recognized in earnings as they occur but rather systematically over subsequent periods.
Stock-based Compensation
Chemours' stock-based compensation consists of stock options and restricted stock units (RSUs) to employees and non-employee directors. Stock options are
measured at fair value on the grant date or date of modification, as applicable. We recognize compensation expense on a straight-line basis over the requisite
service period. The number of awards ultimately expected to vest is determined by use of an estimated forfeiture rate. The estimated forfeiture rate is based on
historical data for the employee group awarded options and expected employee turnover rates, which management reevaluates each period.
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent
the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents
income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and
tax basis of Chemours’ assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to
reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.
Chemours recognizes income tax positions that meet the more likely than not threshold and accrues interest related to unrecognized income tax positions, which is
included in other income, net in our Consolidated Statements of Operations. Income tax related penalties are included in the provision for income taxes.
Chemours does not provide for income taxes on undistributed earnings of all foreign subsidiaries that are intended to be indefinitely reinvested.
Prior to separation on July 1, 2015, income taxes presented attributed current and deferred income taxes of DuPont to Chemours’ stand-alone financial statements
in a manner that is systematic, rational, and consistent with the asset and liability method prescribed by ASC 740, Income Taxes (ASC 740). Accordingly,
Chemours’ income tax provision was prepared following the separate return method. The separate return method applies ASC 740 to the stand-alone financial
statements of each member of the consolidated group as if the group member were a separate taxpayer and a stand-alone enterprise.
Foreign Currency Translation
Chemours identifies its separate and distinct foreign entities and groups them into two categories: (1) extensions of the parent (U.S. dollar functional currency) and
(2) self-contained (local functional currency). If a foreign entity does not align with either category, factors are evaluated and a judgment is made to determine the
functional currency. Chemours changes the functional currency of its separate and distinct foreign entities only when significant changes in economic facts and
circumstances indicate clearly that the functional currency has changed.
During the periods covered by the Consolidated Financial Statements, part of the Chemours business operated within foreign entities. For foreign entities where the
U.S. dollar is the functional currency, all foreign currency-denominated asset and liability amounts are remeasured into U.S. dollars at end-of-period exchange
rates, except for inventories; prepaid expenses; property, plant
F- 12
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
and equipment; goodwill and other intangible assets, which are remeasured at historical rates. Foreign currency-denominated income and expenses are remeasured
at average exchange rates in effect during the period, except for expenses related to balance sheet amounts remeasured at historical exchange rates. Exchange gains
and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in other income, net in the period in which
they occur.
For foreign entities where the local currency is the functional currency, assets and liabilities denominated in local currencies are translated into U.S. dollars at end-
of-period exchange rates and the resulting translation adjustments are reported as a component of accumulated other comprehensive (loss) income in equity. Assets
and liabilities denominated in other than the functional currency are remeasured into the functional currency prior to translation into U.S. dollars and the resulting
exchange gains or losses are included in income in the period in which they occur. Income and expenses are translated into U.S. dollars at average exchange rates
in effect during the period.
Beginning in 2015, when the Chemours operations were legally and operationally separated within DuPont in anticipation of the spin-off, certain of Chemours
foreign entities set their local currency as the functional currency.
Derivatives
Chemours enters into forward currency exchange contracts to minimize volatility in earnings related to the foreign exchange gains and losses resulting from
remeasuring net monetary assets that Chemours holds which are denominated in non-functional currencies. Chemours does not hold or issue financial instruments
for speculative or trading purposes. The derivative assets and liabilities are reported on a gross basis in the Consolidated Balance Sheets. All gains and losses
resulting from the revaluation of the derivative assets and liabilities are recognized in other income, net in the Consolidated Statements of Operations during the
period in which they occurred. Please refer to Note 20 for additional information.
Fair Value Measurement
Under the accounting for fair value measurements and disclosures, a fair value hierarchy was established that prioritizes the inputs to valuation techniques used to
measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements)
and the lowest priority to unobservable inputs (Level 3 measurements). A financial instrument's level within the fair value hierarchy is based on the lowest level of
any input that is significant to the fair value measurement.
Chemours uses the following valuation techniques to measure fair value for its assets and liabilities:
(a) Level 1—Quoted market prices in active markets for identical assets and liabilities;
(b) Level 2—Significant other observable inputs (e.g. quoted prices for similar items in active markets, quoted prices for identical or similar items in markets
that are not active, inputs other than quoted prices that are observable, such as interest rate and yield curves, and market-corroborated inputs); and
(c) Level 3—Unobservable inputs for the asset or liability, which are valued based on management's estimates of assumptions that market participants would
use in pricing the asset or liability.
Recent Accounting Pronouncements
In November 2015, the Financial Accounting Standards Board (FASB) issued ASU No. 2015-17, "Income Taxes (Topic 740) - Balance Sheet Classification of
Deferred Taxes", to simplify the presentation of deferred income taxes and require that deferred income tax liabilities and assets be classified as noncurrent in a
classified statement of financial position. The amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and
interim periods within those annual periods, and earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The
Company retroactively adopted this change effective in 2015 and as such the 2014 Consolidated Balance Sheet reflects the reclassifications affecting total current
assets, total assets, total current liabilities and total liabilities . The reclassifications did not have a significant impact on Chemours' financial position and had no
impact on its results of operations or cash flows. See Note 8 for additional information.
In June 2015, the FASB issued ASU No. 2015-11, "Inventory (Topic 330), Simplifying the Measurement of Inventory," which requires an entity to measure
inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably
predictable costs of completion, disposal, and transportation. Currently, the inventory standard requires an entity to measure inventory at the lower of cost or
market. Market could be replacement cost,
F- 13
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
net realizable value, or net realizable value less an approximately normal profit margin. The amendment does not apply to inventory that is measured using LIFO
or the retail inventory method but applies to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. The
amendment is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and should be applied prospectively
with earlier application permitted as of the beginning of an interim or annual reporting period. Chemours is currently evaluating the impact of adopting this
guidance.
In May 2015, the FASB issued ASU No. 2015-07, "Fair Value Measurement (Topic 820) - Disclosures for Investment in Certain Entities that Calculate Net Asset
Value per Share or its Equivalent." This guidance removes the requirement to categorize within the fair value hierarchy all investments for which fair value is
measured using the net asset value per share practical expedient. The guidance also removes the requirement to make certain disclosures for all investments that are
eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity
has elected to measure the fair value using that practical expedient. The amendment is effective for fiscal years beginning after December 15, 2015 and interim
periods within those fiscal years. A reporting entity should apply the amendments retrospectively to all periods presented and earlier application is permitted.
Chemours adopted this guidance effective January 1, 2016. The adoption is not expected to have a significant impact on our financial position and results of
operations.
In April 2015, the FASB issued ASU No. 2015-05, "Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement," which provides guidance about
whether a cloud computing arrangement includes a software license. The customer should account for the software license element of the arrangement consistent
with the acquisition of other software licenses. If the cloud computing arrangement does not include a software license, the customer should account for the
arrangement as a service contract. This guidance is effective for annual periods, including interim periods within those annual periods, beginning after December
15, 2015, and early adoption is permitted. Chemours adopted this guidance effective January 1, 2016. The adoption is not expected to have a significant impact on
our financial position and results of operations.
In April 2015, the FASB issued ASU No. 2015-03, “Interest — Imputation of Interest (Subtopic 835-30),” which requires debt issuance costs related to a
recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.
The guidance is effective for public entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015 with early
adoption permitted, including adoption in an interim period. Chemours adopted this guidance for the quarter ending June 30, 2015. The adoption of this standard
had no impact on Chemours’ results of operations or cash flows. Due to the accounting change described above, Chemours recorded debt issuance costs incurred
for the issuance of its senior secured term loans and senior unsecured notes as a reduction of the liability on the Consolidated Balance Sheets. See Note 18 for
additional information.
In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” The amendments modify the
evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities and eliminate the presumption
that a general partner should consolidate a limited partnership. The amendment is effective for public entities for fiscal years, and for interim periods within those
fiscal years, beginning after December 15, 2015. Chemours adopted this guidance effective January 1, 2016. The adoption is not expected to have a significant
impact on our financial position and results of operations.
In May 2014, the FASB and the International Accounting Standards Board (IASB) jointly issued ASU No. 2014-09, "Revenue from Contracts with Customers
(Topic 606)," which clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting
Standards (IFRS). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The guidance is effective for public
entities for annual and interim periods beginning after December 15, 2016 (original effective date). In July 2015, the FASB approved a deferral of the effective
date of this guidance to provide entities with adequate time to effectively implement the new revenue standard and adoption as of the original effective date is
permitted. The Company is currently evaluating the impact of adopting this guidance on its financial position and results of operations.
In April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” amending
existing requirements for reporting discontinued operations and disposals of components of an entity. The amended guidance limits the discontinued operations
reporting to disposal transactions that represent strategic shifts having a major effect on operations and financial results. The amendment also enhances disclosures
and requires assets and liabilities of a discontinued operation to be classified as such for all periods presented in the financial statements. Chemours adopted this
guidance effective on January 1, 2015. Due to the change in requirements for reporting discontinued operations
F- 14
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
described above, presentation and disclosures of future disposal transactions after adoption may be different than under current standards.
Note 4. Relationship with DuPont and Related Entities
Prior to the spin-off, Chemours was managed and operated in the normal course of business with other affiliates of DuPont. Accordingly, certain shared costs were
allocated to Chemours and reflected as expenses in the stand-alone Consolidated Financial Statements. Management of DuPont and Chemours considered the
allocation methodologies used to be reasonable and appropriate reflections of the historical DuPont expenses attributable to Chemours for purposes of the stand-
alone financial statements. The expenses reflected in the Consolidated Financial Statements may not be indicative of expenses that will be incurred by Chemours in
the future.
Subsequent to July 1, 2015, DuPont was no longer a related party of Chemours. Chemours' ongoing relationship with DuPont is governed by a separation
agreement and other agreements with DuPont related to the spin-off, including an employee matters agreement, a tax matters agreement, a transition services
agreement and an intellectual property cross-license agreement. These agreements provided for the allocation of various assets, liabilities, rights and obligations,
and include arrangements for transition services to be provided by DuPont to Chemours.
(a) Related Party Sales
Prior to the spin-off, including certain periods covered by the Consolidated Financial Statements, Chemours sold finished goods to DuPont and its non-Chemours
businesses.
Related party sales to DuPont include the following amounts:
Selling Segment
Titanium Technologies
Fluoroproducts
Chemical Solutions
Total
Year Ended December 31,
2015
2014
2013
$
$
$
2 1
34 1
21 1
57
$
$
—
45
65
110
$
6
37
78
121
1 Subsequent to the spin-off on July 1, 2015, transactions with DuPont businesses were not considered related party transactions.
(b) Leveraged Services and Corporate Costs
Prior to the spin-off on July 1, 2015, DuPont incurred significant corporate costs for services provided to Chemours as well as other DuPont businesses. These
costs included expenses for information systems, accounting, other financial services such as treasury and audit, purchasing, human resources, legal, facilities,
engineering, corporate research and development, corporate stewardship, marketing and business analysis support.
A portion of these costs benefited multiple or all DuPont businesses, including Chemours, and were allocated to Chemours and its reportable segments using
methods based on proportionate formulas involving total costs or other various allocation methods that management considered consistent and reasonable. Other
Chemours corporate costs are not allocated to the reportable segments and are reported in Corporate and Other.
The allocated leveraged functional service expenses and general corporate expenses included in the Consolidated Statements of Operations were $238 (through
June 30, 2015), $ 492 and $519 for the years ended December 31, 2015 , 2014 and 2013 , respectively. Allocated leveraged functional service expenses and general
corporate expenses were recorded in the Consolidated Statements of Operations within the following captions:
F- 15
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Selling, general and administrative expense
Research and development expense
Cost of goods sold
Total
Year Ended December 31,
2015
2014
2013
1
$
1
1
205
10
23
411
$
49
32
238 $
492
$
436
50
33
519
$
$
1 Subsequent to the spin-off on July 1, 2015, transactions with DuPont businesses were not considered related party transactions. Accordingly, no costs were allocated after
the July 1, 2015 spin-off date.
(c) Cash Management and Financing
For a portion of the periods presented, Chemours participated in DuPont’s centralized cash management and financing programs. Disbursements were made
through centralized accounts payable systems which were operated by DuPont. Cash receipts were transferred to centralized accounts, also maintained by DuPont.
As cash was disbursed and received by DuPont, it was accounted for by Chemours through DuPont Company Net Investment.
The separation agreements set forth a process to true-up cash and working capital transferred to us from DuPont at separation. In January 2016, Chemours and
DuPont entered into an agreement, contingent upon the credit agreement amendment (described in Note 18), which provided for the extinguishment of payment
obligations of cash and working capital true-ups previously contemplated in the separation agreements. As a result, Chemours was not required to make any
payments to DuPont, nor did DuPont make any payments to Chemours. In addition, the agreement set forth an advance payment of approximately $190 , which
was paid to Chemours in February 2016, for certain specified goods and services that Chemours expects to provide to DuPont over the next twelve to fifteen
months under existing agreements with Chemours.
(d) Tax Matters Agreement
Chemours and DuPont entered into a tax matters agreement that governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities
and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. In general,
under the agreement, DuPont is responsible for any U.S. federal, state and local taxes (and any related interest, penalties or audit adjustments) reportable on a
consolidated, combined or unitary return that includes DuPont or any of its subsidiaries and Chemours and/or any of its subsidiaries for any periods or portions
thereof ending on or prior to the date of the Separation and Chemours is responsible for any U.S. federal, state, local and foreign taxes (and any related interest,
penalties or audit adjustments) that are imposed on Chemours and/or any of its subsidiaries for all tax periods, whether before or after the date of the distribution.
Note 5. Research and Development Expense
Research and development expense directly incurred by Chemours was $ 87 , $94 and $ 114 for the years ended December 31, 2015 , 2014 and 2013 , respectively.
Research and development expense also includes $ 10 , $ 49 and $ 50 for the years ended December 31, 2015 , 2014 and 2013 , respectively, which represents an
assignment of costs associated primarily with DuPont’s Corporate Central Research and Development long-term research activities. This assignment was based on
the cost of research projects for which Chemours was determined to be the sponsor or co-sponsor. All research services provided by DuPont’s Central Research
and Development to Chemours were specifically requested by Chemours, covered by service-level agreements and billed based on usage. DuPont research and
development services were no longer used after the separation on July 1, 2015.
F- 16
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Note 6. Employee Separation and Asset Related Charges, Net
For the years ended December 31, 2015, 2014 and 2013, Chemours recorded charges for employee separation and asset related charges as follows:
Employee Separation Charges
Asset Related Charges - Restructuring
Asset Related Charges - Impairment 1
Decommissioning and other charges - Restructuring
Total
$
$
137 $
133
48
15
333 $
18 $
3
—
—
21 $
2
—
—
—
2
Year Ended December 31,
2015
2014
2013
1 See Note 12 for further information.
Transformation Plan
During the third quarter of 2015, Chemours announced a plan to transform the Company by reducing structural costs, growing market positions, optimizing its
portfolio, refocusing investments, and enhancing its organization (the "Transformation Plan"). Through a combination of higher free cash flow from operations,
lower capital spending, and potential proceeds from asset sales, the Company anticipates reducing its leverage ratio (net debt to Adjusted EBITDA (see Note 23 for
definition)). Key actions initiated under the Transformation Plan since the separation included Titanium Technologies plant and production line closures,
Fluoroproduct line closures, Reactive Metals Solutions (RMS) plant closure and other cost reduction initiatives including global workforce reduction.
Titanium Technologies Plant Closures: In August 2015, the Company announced the closure of its Edge Moor, Delaware manufacturing site located in the U.S.
The Edge Moor plant produced TiO 2 product for use in the paper industry and other applications where demand has steadily declined, resulting in underused
capacity at the plant. In addition, the Company permanently shut down one underused TiO 2 production line at its New Johnsonville, Tennessee plant. The
Company stopped production at Edge Moor in September 2015 and immediately began decommissioning the plant. The Company expects to complete
decommissioning activities in first quarter of 2016 and will begin dismantling thereafter. Dismantling and removal activities are expected to be completed in early
2017.
As a result, the Company recorded charges of approximately $140 , which consisted of employee separation costs of $11 , property, plant and equipment and other
asset impairment charges of $115 , and decommission costs and other charges of $14 . The Company also expects to incur additional charges of approximately $50
for decommissioning, dismantling and removal costs through early 2017, which will be expensed as incurred.
Fluoroproducts Restructuring: Also, in August 2015, in an effort to improve the profitability of the Fluoroproducts segment, management approved the
shutdown of certain production lines of the segment’s manufacturing facilities in the U.S. As a result, the Company recorded restructuring charges of
approximately $21 , which consist of property, plant and equipment accelerated depreciation of $18 , employee separation costs of $2 , and decommissioning and
other costs of $1 . The Company expects to incur additional charges of approximately $5 for decommissioning, dismantling and removal costs during 2016, which
will be expensed as incurred.
RMS Closure: Also during the fourth quarter of 2015, the Company announced the completion of the strategic review of its RMS business and the decision to stop
production at the Niagara Falls, New York site by the end of December 2016. The Niagara Falls plant has approximately 200 employees and contractors that will
be impacted by this action. In the fourth quarter of 2015, the Company recorded approximately $12 of employee separation costs. Additional restructuring charges
of approximately $15 for contract termination, decommissioning and site redevelopment are expected to be incurred in 2016 through 2018. Impairment of RMS
related assets were recorded in the third quarter of 2015 (see Note 12 for further information).
F- 17
Table of Contents
Global Restructuring Programs
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
In November 2015, Chemours announced an additional global workforce reduction of approximately 430 positions. This action is part of ongoing efforts to
streamline and simplify the structure of the organization worldwide and to reduce costs. As a result of these actions, the Company recorded approximately $48 of
employee separation costs during the fourth quarter of 2015. The headcount reduction is expected to be completed in 2016 and related payments are expected to be
substantially complete in 2017.
In June 2015, in light of continued weakness in the global titanium dioxide market cycle and continued foreign currency impacts due to the strengthening of the
U.S. dollar, Chemours implemented a restructuring plan to reduce and simplify its cost structure. This plan resulted in a global workforce reduction of more than
430 positions. As a result, we recorded a pre-tax charge of $64 for employee separation costs in the year ended December 31, 2015 . The actions associated with
this charge and all related payments are expected to be substantially complete by the end of 2016.
In 2014, Chemours implemented a restructuring plan to increase productivity and recorded a pre-tax charge of $19 related to this initiative. The charge consisted of
$16 related to employee separation costs and $3 for asset shut-down costs. The actions associated with this charge and all related payments are substantially
complete as of December 31, 2015.
The charges related to our programs and impairments impacted segment earnings for the years ended December 31, 2015 and 2014 as follows:
Titanium
Technologies
Fluoroproducts
Chemical Solutions
Total
Year ended December 31, 2015
Titanium Technologies plant closures
$
140 $
Fluoroproducts restructuring and other asset
impairment
RMS plant closure
2015 Restructuring
Year ended December 31, 2014
2014 Restructuring
$
$
—
—
33
173 $
3 $
— $
24
—
54
78 $
16 $
— $
—
57
25
82 $
— $
140
24
57
112 1
333
19
1 Includes approximately $24 related to corporate overhead functions that was allocated to our segments.
F- 18
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
The following table shows the change in our significant liability account balances.
Balance as of December 31, 2013
$
— $
— $
— $
— $
Titanium
Technologies Site
Closures
Chemical Solutions
Site Closures
2015 Restructuring
2014 Restructuring
Total
Charges to income for the year ended
December 31, 2014
Charges to liability accounts:
Payments
Net currency translation adjustment
Balance as of December 31, 2014
Charges to income for the year ended
December 31, 2015
Charges to liability accounts:
Payments
Net currency translation adjustment 1
Balance as of December 31, 2015
$
—
—
—
—
11
—
—
11 $
—
—
—
—
12
—
—
12 $
—
—
—
—
112
(39)
—
73
$
1 Net currency translation adjustment for the year ended December 31, 2015 was less than $1 .
Note 7. Other Income, Net
—
16
(2)
(2)
12
16
(2)
(2)
12
—
135
(11)
—
1
$
(50)
—
97
Year Ended December 31,
2015
2014
2013
Leasing, contract services and miscellaneous income
$
25 $
17 $
Royalty income 1
Gain on purchase of equity method investment
(Loss) gain on sale of assets and businesses 2
Exchange gains (losses), net 3
Total other income, net
19
—
(9)
19
28
—
40
(66)
$
54 $
19 $
24
24
7
—
(31)
24
1 Royalty income is primarily for technology and trademark licensing.
2 In 2015, the Company sold its subsidiary in Sweden for proceeds of $4 that resulted in a loss on sale of $9 in the Fluoroproducts segment. In 2014, the gain of $40 includes
gains on sales of businesses of $30 and $4 in the Fluoroproducts and Titanium Technologies segments, respectively. The remaining $6 related to gain on other sale of assets
in the Fluoroproducts segment.
3 Chemours uses foreign currency forward contracts to offset its net exposure, by currency, related to its non-functional currency-denominated monetary assets and liabilities.
See Note 20 for further information. The pre-tax exchange gains are recorded in other income, net and the related tax impact is recorded in provision for income taxes in the
Consolidated Statements of Operations. The $ 19 net exchange gain for the year ended December 31, 2015 includes a gain on derivatives of $42 , partially offset by a $ 23
pre-tax exchange loss on non-functional monetary assets and liabilities as a result of the strengthening of the U.S. dollar against the Mexican peso, Euro, Thai baht, Chinese
yuan and other currencies. Exchange losses in 2014 and 2013, respectively, were primarily driven by the strengthening of the U.S. Dollar versus the Swiss franc and the Euro
in 2014, and a strengthening of the U.S. dollar versus the Venezuelan bolivar and the Brazilian real in 2013.
F- 19
Table of Contents
Note 8. Income Taxes
(Dollars
in
millions)
Current tax expense:
U.S. federal
U.S. state and local
International
Total current tax expense
Deferred tax (benefit) expense:
U.S. federal
U.S. state and local
International
Total deferred tax benefit
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Year Ended December 31,
2015
2014
2013
$
$
37 1
1 1
62
100
(187)
(14)
3
(198)
85
13
73
171
(20)
(3)
1
(22)
149
$
$
67
11
88
166
(4)
(2)
(8)
(14)
152
Total (benefit from) provision for income taxes
$
(98)
$
1 Recorded pursuant to the tax matters agreement.
The significant components of deferred tax assets and liabilities are as follows:
(Dollars
in
millions)
Deferred tax assets-noncurrent:
Other assets and other accrued liabilities
Tax loss carryforwards
Total deferred tax assets-noncurrent
Valuation allowance
Total deferred tax assets, net
Deferred tax liabilities-noncurrent:
Goodwill and other intangibles
Accrued expenses and other liabilities
Property, plant and equipment
Inventories and other assets
Total deferred tax liabilities-noncurrent
Net deferred tax liability
December 31, 2015 December 31, 2014
$
$
257
124
381
—
381
—
(7)
(530)
(31)
(568)
$
(187)
$
F- 20
188
36
224
(36)
188
(2)
(34)
(533)
(33)
(602)
(414)
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
An analysis of the Company's effective tax rate is as follows:
(Dollars
in
millions)
Statutory U.S. federal income tax rate
State income taxes, net of federal benefit
Benefit from (lower effective tax rate) on international operations-net
Valuation allowance
Exchange (gains) losses
Depletion
Goodwill
Section 199 deduction
Other, net
Total effective tax rate
(Loss) income before income taxes for U.S. and international operations was:
Year Ended December 31,
2015
2014
2013
35.0 %
5.1 %
12.0 %
— %
0.5 %
3.4 %
(3.2)%
— %
(0.5)%
52.3 %
35.0 %
1.0 %
(9.6)%
2.0 %
2.7 %
(3.9)%
— %
(0.7)%
0.6 %
27.1 %
35.0 %
1.0 %
(10.2)%
1.2 %
2.3 %
(4.1)%
— %
(0.8)%
2.0 %
26.4 %
(Dollars
in
millions)
U.S. (including exports)
International
Total pre-tax (loss) income
Year Ended December 31,
2015
2014
2013
$
$
(492) $
304
(188) $
244 $
306
550 $
224
352
576
Chemours recorded a tax benefit of $98 for the year ended December 31, 2015 and provisions of $149 and $152 for the years ended December 31, 2014 and 2013,
respectively. The $247 decrease in the tax provision was primarily due to tax benefits recognized from the restructuring and asset impairment charges in the U.S.
recorded in the second half of 2015, partially offset by earnings in foreign jurisdictions.
The decrease in state income tax provision and the corresponding increase in the state effective tax rate, net of federal benefit, for the year ended December 31,
2015 as compared to 2014 and 2013 is due to the tax benefit recognized from the restructuring and asset impairment charges in the U.S. The tax benefit from
international operations is primarily driven by Chemours’ overall geographic mix of earnings. The Company did not have valuation allowance as of December 31,
2015 as compared to 2014 and 2013, as the valuation allowance relates to pre-spin assets that are the responsibilities of DuPont pursuant to the tax matters
agreement. Exchange (gains) losses principally reflect the impact of non-taxable gains and losses resulting from remeasurement of foreign currency-denominated
monetary assets and liabilities. Depletion represents the tax benefit from the percentage depletion deductions taken pursuant to Section 613 of the Code. Goodwill
represents the tax effect of the goodwill reallocation based on Chemours’ new business reporting units and impairment charges, as described in Note 13. In
addition, Chemours is entitled to a domestic manufacturing deduction relating to income from certain qualifying domestic production activities pursuant to Section
199 of the Code in tax years 2014 and 2013, as well as a one-time tax benefit recognized in 2014 relating to a tax accounting method change. Consistent with the
discussion in Note 2, the pre-spin effective tax rate stated herein may not be indicative of the future effective tax rate of Chemours as a result of the separation
from DuPont.
Under the tax laws of various jurisdictions in which the Company operates, deductions or credits that cannot be fully utilized for tax purposes during the current
year may be carried forward or back, subject to statutory limitations, to reduce taxable income or taxes payable in the future or prior years. At December 31, 2015,
the tax effect of such carryforwards is $124 . Of this amount, $25 expires in 2026, $90 expires in 2036, and $9 expires from 2021 to 2036, the majority of which
expires in 2036. Based on analysis of the cumulative earnings from the prior three years, the Company determined it is more likely than not that these assets will be
fully utilized.
F- 21
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
At December 31, 2015, in connection with the spin-off, the Company deemed approximately $1.5 billion of unremitted earnings of subsidiaries outside the U.S. as
indefinitely reinvested. No deferred tax liability has been recognized with regard to the remittance of such earnings. It is not practical to estimate the income tax
liability that might be incurred if such earnings were remitted to the U.S.
Each year, Chemours and/or its subsidiaries, files income tax returns in the U.S. federal jurisdiction and various states and non-U.S. jurisdictions. These tax returns
are subject to examination and possible challenge by the taxing authorities. Positions challenged by the taxing authorities may be settled or appealed by Chemours
and/or DuPont in accordance with the tax matters agreement. As a result, income tax uncertainties are recognized in Chemours’ Consolidated Financial Statements
in accordance with accounting for income taxes, when applicable. It is reasonably possible that changes to Chemours' global unrecognized tax benefits could be
significant; however, due to the uncertainty regarding the timing of completion of audits and possible outcomes, a current estimate of the range of such changes
that may occur within the next twelve months cannot be made.
As previously discussed in Note 3, prior to our spin-off, Chemours was included in DuPont's consolidated income tax returns, and Chemours’ income taxes for
those periods are computed and reported herein under the “separate return method.” Use of the separate return method may result in differences when the sum of
the amounts allocated to stand-alone tax provisions are compared with amounts presented in Consolidated Financial Statements. In that event, the related deferred
tax assets and liabilities could be significantly different from those presented herein for these periods. Certain tax attributes, e.g. net operating loss carryforwards,
which were actually reflected in DuPont’s consolidated financial statements may or may not exist at the stand-alone Chemours level. Chemours’ Consolidated
Financial Statements do not reflect any amounts due to DuPont for income tax related matters prior to separation as it is assumed that all such amounts due to
DuPont were settled on December 31 of each year.
The following table shows the change in our unrecognized tax benefit.
(Dollars
in
millions)
Total unrecognized tax benefits as of January 1
Gross amounts of decreases in unrecognized tax benefits as a result of adjustments to tax
provisions taken during the prior period
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken
during the current period
Reduction to unrecognized tax benefits as a result of a lapse of the applicable statute of
limitations
Total unrecognized tax benefits as of December 31
Total unrecognized tax benefits, if recognized, that would impact the effective tax rate
Total amount of interest and penalties recognized in the Consolidated Statements of
Operations
Total amount of interest and penalties recognized in the Consolidated Balance Sheets
1 Recorded pursuant to the tax matters agreement.
$
$
$
F- 22
Year Ended December 31,
2015
2014
2013
39
$
26
$
—
—
(32) 1
7
$
(1)
15
(1)
39
$
—
$
39
$
1 1
—
2
8
24
(1)
5
(2)
26
26
2
6
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
The following is a rollforward of the deferred tax asset valuation allowance for the years ended December 31, 2015, 2014 and 2013.
(Dollars
in
millions)
Balance at beginning of period
Net charges to income tax expense
Release of valuation allowance 1
Balance at end of period
Year Ended December 31,
2015
2014
2013
$
$
36
$
—
(36)
— $
26 $
10
—
36 $
19
7
—
26
1 Release of valuation allowance during 2015 was primarily related to the tax attributes retained by DuPont pursuant to the tax matters agreement .
Note 9. Earnings Per Share of Common Stock
The table below shows a reconciliation of the numerator and denominator for basic and diluted earnings per share calculations for the periods indicated.
Numerator:
Net (loss) income attributable to Chemours
$
(90)
$
400
$
423
Year Ended December 31,
2015
2014
2013
Denominator:
Weighted-average number of common shares
outstanding- Basic
Dilutive effect of the Company's employee
compensation plans 2
Weighted average number of common shares outstanding
- Diluted 2
180,993,623
180,966,833 1
180,966,833 1
—
—
—
180,993,623
180,966,833
180,966,833
1 For 2013 and 2014, pro forma earnings per share (EPS) was calculated based on 180,966,833 shares of Chemours common stock that were distributed to DuPont
shareholders on July 1, 2015.
2 Diluted (loss) earnings per share is calculated using net (loss) income available to common shareholders divided by diluted weighted-average shares of common shares
outstanding during each period, which includes unvested restricted shares. Diluted earnings per share considers the impact of potentially dilutive securities except in
periods in which there is a loss because the inclusion of the potential common shares would have an antidilutive effect. Chemours had no equity awards outstanding prior
to the spin-off.
The following average number of stock options were antidilutive and, therefore, were not included in the diluted earnings per share calculation:
Average number of stock options
8,358,894
—
—
Year Ended December 31,
2015
2014
2013
F- 23
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Note 10. Accounts and Notes Receivable – Trade, Net
Accounts receivable—trade, net 1
VAT, GST and other taxes 2
Leases receivable—current
Other receivables 3
Total
December 31, 2015
December 31, 2014
$
$
757
$
68
13
21
859
$
746
62
12
26
846
1 Accounts receivable – trade is net of allowances of $ 4 and $ 4 as of December 31, 2015 and 2014 , respectively. Allowances are equal to the estimated uncollectible amounts.
2 Value Added Tax (VAT) and Goods and Services Tax (GST).
3 Other receivables consist of notes receivable, advances and other deposits.
Accounts and notes receivable are carried at amounts that approximate fair value. Bad debt expense was less than $1 for the year ended December 31, 2015 , and $
1 and $2 for the years ended December 31, 2014 and 2013 , respectively.
Direct Financing Leases
At two of its facilities in the U.S. (Borderland and Morses Mill), Chemours has constructed fixed assets on land that it leases from third parties. Management has
analyzed these arrangements and determined these assets represent a direct financing lease, whereby Chemours is the lessor of this equipment. Chemours has
recorded leases receivable of $ 138 and $ 149 at December 31, 2015 and 2014 , respectively, which represent the balance of the minimum future lease payments
receivable. The current portion of leases receivable is included in accounts and notes receivable - trade, net, as shown above. The long-term portion of leases
receivable is included in other assets, as shown in Note 14. Management has evaluated the realizable value of these leased assets and determined no impairment
existed at December 31, 2015 or December 31, 2014 . There is no estimated future residual value of these leased assets.
Note 11. Inventories
Finished products
Semi-finished products
Raw materials, stores and supplies
Subtotal
Adjustment of inventories to LIFO basis
Total
December 31, 2015
December 31, 2014
$
613
172
433
1,218
(246)
972
$
611
173
521
1,305
(253)
1,052
$
$
Inventory values, before LIFO adjustment, are generally determined by the average cost method, which approximates current cost. Inventories are valued using the
LIFO method at substantially all of the U.S. locations, which comprised $744 and $ 684 or 61% and 52% of inventories before the LIFO adjustments at
December 31, 2015 and December 31, 2014 , respectively. The remainder of inventory held in international locations and certain U.S. locations is valued using the
average cost method.
F- 24
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Note 12. Property, Plant and Equipment
Chemours' property, plant and equipment consisted of:
Equipment
Buildings
Construction in progress
Land
Mineral rights
Total
Accumulated depreciation
Net property, plant and equipment
December 31, 2015
December 31, 2014
$
7,327
$
737
804
111
36
9,015
(5,838)
$
3,177
$
7,500
778
852
116
36
9,282
(5,974)
3,308
Depreciation expense amounted to $264 , $254 and $255 for the years ended December 31, 2015 , 2014 and 2013 , respectively. Property, plant and equipment
includes gross assets under capital leases of $ 7 and $ 6 at December 31, 2015 and 2014 , respectively. Interest expense capitalized as part of property, plant and
equipment was $ 21 for the year ended December 31, 2015 . Chemours did not incur interest in the years ended December 31, 2014 or 2013 .
During the third quarter of 2015, in connection with the strategic evaluation of the Chemical Solutions portfolio, excluding cyanides, the Company determined that
the carrying value of the RMS manufacturing facility of the Chemical Solutions segment may not be recoverable given the strategic decision to discontinue
investment in the business. An impairment evaluation was performed which indicated that the carrying amount of this asset group in the U.S. was not recoverable
when compared to the expected undiscounted cash flows. Based on management’s assessment of the fair value of the asset group, the Company determined that the
carrying value of that asset group exceeded the fair value and as a result, a $45 pre-tax impairment charge was recorded in the Chemical Solutions segment. The
fair value of the asset group was determined using an income approach based on the present value of the estimated future cash flows. The key assumptions used
included growth rates and cash flow projections, discount rate, tax rate and an estimated terminal value. The amount was recorded in employee separation and asset
related charges, net in the Consolidated Statements of Operations. Refer to Note 6 for additional information.
Asset
Held
for
Sale
In November 2015, the Company signed a definitive agreement to sell its aniline facility in Beaumont, Texas to The Dow Chemical Company (Dow) for
approximately $140 in cash, subject to customary approvals and closing conditions. The Company expects the transaction to close and record a gain in the
Chemical Solutions segment in the quarter ending March 31, 2016. As of December 31, 2015 , the asset disposal group of approximately $46 was classified as
held-for-sale within the caption prepaid expenses and other in the Consolidated Balance Sheets.
Note 13. Goodwill and Other Intangible Assets, Net
Goodwill: The following table summarizes changes in the carrying amount of goodwill by reportable segment:
Titanium Technologies
Fluoroproducts
Chemical Solutions
Total
Balance as of December 31, 2013
$
Impairment charge
Other adjustments
Balance as of December 31, 2014
Impairment charge
Other adjustments
Balance as of December 31, 2015
$
13 $
—
—
13
—
—
13 $
F- 25
85 $
—
—
85
—
—
85 $
100
$
—
—
100
(25)
(7)
68
$
198
—
—
198
(25)
(7)
166
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Accumulated impairment losses as of December 31, 2015 , 2014 and 2013 included in goodwill are $25 , $0 , and $0 , respectively.
The Company has three segments: Titanium Technologies, Fluoroproducts and Chemical Solutions (see further discussion of reportable segments in Note 23). The
Company defines its reporting units as its operating segments for Titanium Technologies; however, the Fluoroproducts and Chemical Solutions segments represent
three and seven reporting units, respectively.
In the third quarter of 2015, in connection with the strategic evaluation of the Chemical Solutions portfolio, the Company realigned the reporting structure of the
portfolio, specifically the level at which segment management regularly reviews operating results. The Company now identifies seven reporting units for purposes
of goodwill allocation and impairment assessment. These seven reporting units are Aniline, Clean & Disinfect, Cyanides, Methylamines, Reactive Metal Solutions,
Sulfur, and Vazo. Chemical Solutions remains a single operating segment.
In addition, in connection with the spin-off on July 1, 2015, the Fluoroproducts segment changed its organizational structure, which changed its reporting units
from Fluorochemicals and Fluoropolymers to Fluorochemicals, Industrial Resins and Diversified Technologies.
In connection with the goodwill allocation to the new reporting units in Fluoroproducts and Chemical Solutions segments during the third quarter of 2015, we
evaluated the reporting units for impairment and determined that the estimated fair values of those reporting units, except for the Sulfur reporting unit, were
substantially in excess of the carrying value, indicating that goodwill was not impaired. We performed the second step of the impairment test for Sulfur and
determined that the implied fair value of goodwill was lower than its carrying value, resulting in a full impairment of the Sulfur reporting unit's goodwill. As a
result, Chemours recorded a $25 million pre-tax impairment charge for goodwill during the year ended December 31, 2015 in the Chemicals Solutions reportable
segment.
The Company also performed its annual impairment tests for Titanium Technologies and Fluorochemicals goodwill and determined that no goodwill impairment
existed as of December 31, 2015, and the fair value of each reporting unit substantially exceeded its carrying value.
Chemours estimates the fair value of its reporting units using the income approach based on the present value of estimated future cash flows, discounted at a risk-
adjusted market rate, including a growth rate to calculate the terminal value. The Company’s forecasted future cash flows, which incorporate anticipated future
revenue growth and related expenses to support the growth, were used to calculate fair value. The factors considered in determining the cash flows include: 1)
macroeconomic conditions; 2) industry and market considerations; 3) costs of raw materials, labor or other costs having a negative effect on earnings and cash
flows; 4) overall financial performance; and 5) other relevant entity-specific events. The discount rate used represents the weighted average cost of capital for the
reporting units considering the risks and uncertainty inherent in the cash flows of the reporting units and in the internally developed forecasts. The implied fair
value of the goodwill in step two was determined by allocating the fair value of the reporting units to all of the assets and liabilities as if the reporting units had
been acquired in a business combination and its fair value was the purchase price paid to be acquired. The use of these unobservable inputs resulted in the fair
value estimate being classified as a Level 3 asset measured at fair value on a nonrecurring basis subsequent to its original recognition.
The determination of whether or not goodwill is impaired involves a significant level of judgment in the assumptions underlying the approaches used to determine
the estimated fair value of our reporting units. Chemours believes that assumptions and rates used in the impairment assessment are reasonable. However, these
assumptions are judgmental and variations in any assumptions could result in materially different calculations of fair value. The Company will continue to evaluate
goodwill on an annual basis as of October 1, and whenever events or changes in circumstances, such as significant adverse changes in operating results, market
conditions or changes in management’s business strategy, indicate that there may be a probable indicator of impairment. It is possible that the assumptions used by
management related to the evaluation may change or that actual results may vary significantly from management’s estimates.
F- 26
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Other Intangible Assets, Net: The following table summarizes the gross carrying amounts and accumulated amortization of other intangible assets by major class:
Customer lists
Patents
Purchased trademarks
Purchased and licensed technology
Total
December 31, 2015
Accumulated
Amortization
Gross
Net
Gross
December 31, 2014
Accumulated
Amortization
Net
$
$
13 $
19
5
8
45 $
(10)
(17)
(2)
(6)
(35)
$
$
3
2
3
2
$
13
$
19
5
5
10
$
42
$
(10)
(15)
(1)
(5)
(31)
$
$
3
4
4
—
11
The aggregate pre-tax amortization expense for definite-lived intangible assets was $ 3 , $ 3 and $ 6 for the years ended December 31, 2015 , 2014 and 2013 ,
respectively. The estimated aggregate pretax amortization expense for 2016, 2017, 2018, 2019 and 2020 is $3 , $2 , $1 , $1 and $1 , respectively. Definite-lived
intangible assets are amortized over their estimated useful lives, generally for periods ranging from 5 to 20 years. The reasonableness of the useful lives of these
assets is continually evaluated. There are no indefinite-lived intangible assets.
Note 14. Other Assets
Leases receivable - non-current 1
Capitalized repair and maintenance costs
Pension assets 2
Advances and deposits
Deferred income taxes
Miscellaneous 3
Total
December 31, 2015
December 31, 2014
$
$
125 $
149
138
11
47
38
508 $
137
185
—
17
10
28
377
1 Leases receivable includes direct financing leases of property at two locations. See Note 10 for further information.
2 Pension assets represent pension plans commencing in 2015. See Note 21 for further information.
3 Miscellaneous includes prepaid expenses for royalty fees, vendor supply agreements and taxes other than income taxes, deferred financing fees related to the
Revolving Credit Facility of $19 at December 31, 2015, as well as capitalized expenses for the preparation of future landfill cells at Titanium Technologies’ New
Johnsonville plant site.
Note 15. Accounts Payable
Trade payables
VAT and other payables
Total
December 31, 2015
December 31, 2014
945 $
28
973 $
1,004
42
1,046
$
$
F- 27
Table of Contents
Note 16. Other Accrued Liabilities
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Compensation and other employee-related costs
Employee separation costs 1
Accrued litigation 2
Environmental remediation 2
Income taxes
Customer rebates
Deferred revenue
Accrued interest
Miscellaneous 3
Total
December 31, 2015
December 31, 2014
$
109 $
76
11
68
32
53
20
21
64
$
454 $
1 See Note 6 for further information.
2 See Note 19 for further discussion of environmental remediation and accrued litigation.
3 Miscellaneous primarily includes accrued utility expenses, property taxes, an accrued indemnification liability and other miscellaneous expenses.
Note 17. Other Liabilities
Environmental remediation 1
Employee-related costs 2
Employee separation costs 3
Accrued litigation 1
Asset retirement obligations 1
Deferred revenue
Miscellaneous 4
Total
December 31, 2015
December 31, 2014
$
223 $
108
23
58
41
11
89
$
553 $
109
12
7
69
—
59
28
—
68
352
226
32
—
52
43
13
98
464
1 See Note 19 for further details on environmental remediation, asset retirement obligations and accrued litigation.
2 See Note 21 for further details on long-term employee benefits.
3 See Note 6 for further information.
4 Miscellaneous primarily includes an accrued indemnification liability.
F- 28
Table of Contents
Note 18. Debt
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
In conjunction with Chemours' separation from DuPont, Chemours entered into approximately $3,995 of financing transactions on May 12, 2015. Long-term debt,
net of an unamortized discount on the Term Loan Facility of $7 , was comprised of the following at December 31, 2015 :
Long-term debt:
Senior secured term loan, net of issue discount
$
Senior unsecured notes:
6.625%, due May 2023
7.00%, due May 2025
6.125%, due May 2023 (€360)
Other
Total
Less: Unamortized debt issuance costs
Less: Short-term borrowings and current maturities
Total long-term debt
$
December 31, 2015
1,493
1,350
750
395
26
4,014
60
39
3,915
Senior
Secured
Credit
Facilities
On May 12, 2015, Chemours entered into a credit agreement that provides for a seven -year senior secured term loan (the Term Loan Facility) in a principal
amount of $1,500 repayable in equal quarterly installments at a rate of one percent of the original principal amount per year, with the balance payable on the final
maturity date. The Term Loan Facility was issued with a $7 original issue discount and bears variable interest rate subject to a floor of 3.75 %. The proceeds from
the Term Loan Facility were used to fund a portion of the distribution to DuPont, along with related fees and expenses.
The credit agreement also provided for a five -year senior secured revolving credit facility (the Revolving Credit Facility), which has been reduced to $750 as part
of the amendment completed on February 19, 2016. The proceeds of any loans made under the Revolving Credit Facility can be used for capital expenditures,
acquisitions, working capital needs and other general corporate purposes. We had no borrowings outstanding under our Revolving Credit Facility at December 31,
2015 , and we had $129 in letters of credit issued and outstanding under this facility. The Revolving Credit Facility bears variable interest of a range based on our
total net leverage ratio between (a) 0.50 % and 1.25 % for base rate loans and (b) 1.50 % and 2.25 % for LIBOR loans. The applicable margin was 1.25% for base
rate loans and 2.25% for LIBOR loans as of December 31, 2015 . In addition, we are required to pay a commitment fee on the average daily unused amount of the
Revolving Credit Facility at a rate based on our total net leverage ratio, between 0.20 % and 0.35 %. Commitment fees are currently assessed at a rate of 0.35% .
During the third quarter of 2015, Chemours and its Revolving Credit Facility lenders entered into an amendment to the Revolving Credit Facility that strengthened
Chemours' financial position by providing enhanced liquidity to implement the Transformation Plan. The amendment modified the consolidated EBITDA
definition in the covenant calculation to include pro forma benefits of announced cost reduction initiatives.
During the first quarter of 2016, Chemours and its Revolving Credit Facility lenders entered into a second amendment to the Revolving Credit Facility that (a)
replaced the total net leverage ratio financial covenant with senior secured net leverage ratio; (b) reduced the minimum required levels of interest expense coverage
ratio covenant; (c) increased the limits and extended the time horizon for inclusion of pro forma benefits of announced cost reduction initiatives into Consolidated
EBITDA definition for the purposes of calculating financial maintenance covenants; and (d) reduced the revolver availability from $1,000 to $750 . These changes
provide further flexibility to Chemours to sustain the prolonged downturn in the business and enhance its liquidity to implement the Transformation Plan.
The credit agreement contains financial covenants which, solely with respect to the Revolving Credit Facility as amended, require Chemours not to exceed a
maximum senior secured net leverage ratio of 3.50 to 1.00 and to maintain a minimum interest coverage ratio of 1.75 to 1.00 until December 31, 2016. In addition,
the credit agreement contains customary affirmative and negative
F- 29
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
covenants that, among other things, limit or restrict Chemours and its subsidiaries' ability, subject to certain exceptions, to incur liens, merge, consolidate or sell,
transfer or lease assets, make investments, pay dividends, transact with subsidiaries and incur indebtedness. The credit agreement also contains customary
representations and warranties and events of default. Chemours was in compliance with its debt covenants as of December 31, 2015 .
Chemours’ obligations under the senior secured credit facilities are guaranteed on a senior secured basis by all of its material domestic subsidiaries, subject to
certain agreed upon exceptions. The obligations under the senior secured credit facilities are also, subject to certain agreed upon exceptions, secured by a first
priority lien on substantially all of Chemours and its material wholly-owned domestic subsidiaries’ assets, including 100% of the stock of domestic subsidiaries
and 65% of the stock of certain foreign subsidiaries.
Senior
Unsecured
Notes
On May 12, 2015, Chemours issued senior unsecured notes (the Notes) with an aggregate principal of approximately $2,503 in a private placement subject to a
registration rights arrangement.
All of the notes, including the 2023 notes with an aggregate principal amount of $1,350 , the 2025 notes with an aggregate principal amount of $750 and the 2023
Euro notes with an aggregate principal amount of €360 (or $ 395 as of December 31, 2015), require payment of principal at maturity and interest semi-annually in
cash in arrears on May 15 and November 15 of each year.
The proceeds from the Notes were used to fund the cash and in-kind distributions to DuPont and to pay related fees and expenses. The in-kind distribution to
DuPont of $507 aggregate principal amount of Chemours 2025 Notes were exchanged by DuPont with third parties for certain DuPont notes.
Chemours is required to register the Notes with the Securities and Exchange Commission within 465 days after the original issue date. If Chemours fails to do so, it
would be required to pay additional interest at a rate of 0.25 % for the first 90 days following a registration default and additional 0.25 % per annum with respect to
each subsequent 90 -day period, up to a maximum rate of 0.50 %, until the registration requirements are met. Application is also expected to be made to the Irish
Stock Exchange for the approval of listing particulars in relation to the Euro notes prior to the first anniversary of the issue date of the Euro notes.
Each series of Notes is or will be fully and unconditionally guaranteed, jointly and severally, by Chemours’ existing and future domestic subsidiaries that guarantee
(the Guarantors) the Senior Secured Credit Facilities or that guarantee other indebtedness of Chemours or any guarantor in an aggregate principal amount in excess
of $75 million (the Guarantees). The Notes are unsecured and unsubordinated obligations of Chemours. The Guarantees are unsecured and unsubordinated
obligations of the Guarantors. The Notes rank equally in right of payment to all of Chemours’ existing and future unsecured unsubordinated debt and senior in right
of payment to all of Chemours’ existing and future debt that is by its terms expressly subordinated in right of payment to the Notes. The Notes are subordinated to
indebtedness under the Senior Secured Credit Facilities as well as any future secured debt to the extent of the value of the assets securing such debt. Chemours’ is
obligated to offer to purchase the Notes at a price of (a) 101 percent of their principal amount, together with accrued and unpaid interest, if any, to the date of
purchase, upon the occurrence of certain change of control events and (b) 100 percent of their principal amount, together with accrued and unpaid interest, if any,
to the date of purchase, with the proceeds from certain asset dispositions. These restrictions and prohibitions are subject to certain qualifications and exceptions set
forth in the Indenture, including without limitation, reinvestment rights with respect to the proceeds of asset dispositions. Chemours is permitted to redeem some or
all of the 2023 Notes and Euro Notes by paying a "make-whole" premium prior to May 15, 2018. Chemours also may redeem some or all of the 2023 Notes and
Euro Notes on or after May 15, 2018 and thereafter at specified redemption prices. Chemours also may redeem some or all of the 2025 Notes on or after May 15,
2020 at specified redemption prices.
Maturities
There are no debt maturities in each of the next seven years, except, in accordance with the credit agreement, Chemours has required quarterly principal payments
related to the Term Loan Facility equivalent to 1.00% per annum beginning September 2015 through March 2022, with the balance due at maturity. Term Loan
principal maturities over the next five years are $15 in each year from 2016 to 2020. Debt maturities related to the Term Loan Facility and the Notes in 2021 and
beyond will be $3,913 .
F- 30
Table of Contents
Debt
Fair
Value
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
The fair values of the Term Loan Facility, the 2023 notes, the 2025 notes and the 2023 Euro notes at December 31, 2015 were approximately $1,348 , $946 , $513
and $277 , respectively. The estimated fair values of the Term Loan Facility and the Notes are based on quotes received from third party brokers, and are classified
as Level 2 in the fair value hierarchy.
Note 19. Commitments and Contingent Liabilities
(a) Guarantees
Obligations for Equity Affiliates and Others
Chemours has directly guaranteed various obligations of customers, suppliers and other third parties. At December 31, 2015 and December 31, 2014 , Chemours
had directly guaranteed $ 8 and $ 41 of such obligations, respectively. These represent the maximum potential amount of future (undiscounted) payments that
Chemours could be required to make under the guarantees in the event of default by the guaranteed parties. No amounts were accrued at December 31, 2015 and
2014 .
Chemours assesses the payment and performance risk by assigning default rates based on the duration of the guarantees. These default rates are assigned based on
the external credit rating of the counterparty or through internal credit analysis and historical default history for counterparties that do not have published credit
ratings. For counterparties without an external rating or available credit history, a cumulative average default rate is used.
Operating Leases
Chemours uses various leased facilities and equipment in its operations. The terms for these leased assets vary depending on the lease agreement. Future minimum
lease payments (including residual value guarantee amounts) under non-cancelable operating leases are $84 , $73 , $62 , $53 and $36 for the years ended December
31, 2016, 2017, 2018, 2019 and 2020, respectively, and $38 for the years thereafter. Net rental expense under operating leases was $83 , $75 and $62 during the
years ended December 31, 2015, 2014 and 2013, respectively.
(b) Asset Retirement Obligations
Chemours has recorded asset retirement obligations primarily associated with closure, reclamation and removal costs for mining operations related to the
production of TiO 2 in the Titanium Technologies segment. Chemours' asset retirement obligation liabilities were $42 and $43 at December 31, 2015 and 2014,
respectively. A summary of the changes in asset retirement obligations is as follows:
(Dollars
in
millions)
Beginning balance
Accretion expense
Additional liabilities incurred
Changes in estimated cash flows
Settlements/payments
Ending balance
Current portion
Non-current portion
Year Ended December 31,
2015
2014
$
$
$
$
43 $
1
—
—
(2)
42 $
1 $
41 $
42
2
1
—
(2)
43
—
43
(c) Litigation
In addition to the matters discussed below, Chemours, by virtue of its status as a subsidiary of DuPont prior to the Distribution, is subject to or required under the
separation-related agreements executed prior to the Distribution to indemnify DuPont against various pending legal proceedings arising out of the normal course of
the Chemours business including product liability, intellectual property, commercial, environmental and antitrust lawsuits. It is not possible to predict the outcome
of these various proceedings.
F- 31
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Except for the PFOA litigation for which a separate assessment is provided in this Note, while management believes it is reasonably possible that Chemours could
incur losses in excess of the amounts accrued, if any, for the aforementioned proceedings, it does not believe any such loss would have a material impact on
Chemours' consolidated financial position, results of operations or liquidity. With respect to the litigation matters discussed below, management's estimate of the
probability of loss in excess of the amounts accrued, if any, is addressed individually for each matter. In the event that DuPont seeks indemnification for adverse
trial rulings or outcomes for any such matter, these indemnification claims could materially adversely affect Chemours' financial condition. Disputes between
Chemours and DuPont may also arise with respect to indemnification matters, including disputes based on matters of law or contract interpretation. If and to the
extent these disputes arise, they could materially adversely affect Chemours.
Asbestos
At December 31, 2015 , there were approximately 2,212 lawsuits pending against DuPont alleging personal injury from exposure to asbestos. These cases are
pending in state and federal court in numerous jurisdictions in the U.S. and are individually set for trial. Most of the actions were brought by contractors who
worked at sites between 1950 and the 1990s. A small number of cases involve similar allegations by DuPont employees. A limited number of the cases were
brought by household members of contractors or DuPont employees. Finally, certain lawsuits allege personal injury as a result of exposure to DuPont products.
Chemours had an accrual of $42 and $38 related to this matter at December 31, 2015 and 2014 , respectively. Additionally, Chemours had an accrual for $3 for
asbestos cases outside the U.S. at December 31, 2015 . Chemours reviews this estimate and related assumptions quarterly and annually updates the results of an
approximate 20 -year projection. Management believes that the likelihood is remote that Chemours would incur losses in excess of the amounts accrued in
connection with this matter.
Benzene
In the separation, DuPont assigned its Benzene docket to Chemours. There are 29 pending cases against DuPont alleging benzene-related illnesses. These cases
consist of premises matters involving contractors and deceased former employees who claim exposure to benzene while working at DuPont sites primarily in the
1960s through the 1980s, and product liability claims based on alleged exposure to benzene found in trace amounts in aromatic hydrocarbon solvents used to
manufacture DuPont products, such as paints, thinners and reducers.
A benzene case (Hood v. DuPont) was tried to a verdict in Texas state court on October 20, 2015. Plaintiffs alleged that Mr. Hood's Acute Myelogenous Leukemia
(AML) was the result of 24 years of occupational exposure to trace benzene found in DuPont automotive paint products and that DuPont negligently failed to warn
him that its paints, reducers and thinners contained benzene that could cause cancer or leukemia. The jury found in the Plaintiffs favor awarding $6.9 in
compensatory damages and $1.5 in punitive damages. Through DuPont, Chemours will appeal the verdict based upon substantial errors made at the trial court.
Management believes that a loss is reasonably possible related to these matters; however, given the evaluation of each Benzene matter is highly fact driven and
impacted by disease, exposure and other factors, a range of such losses cannot be reasonably estimated at this time.
PFOA
Prior to the fourth quarter of 2014, Chemours used PFOA (collectively, perfluorooctanoic acids and its salts, including the ammonium salt) as a processing aid to
manufacture some fluoropolymer resins at various sites around the world including its Washington Works plant in West Virginia. Chemours had accruals of $20
and $14 related to the PFOA matters discussed below at December 31, 2015 and 2014 , respectively.
The accruals include charges related to DuPont’s obligations under agreements with the U.S. Environmental Protection Agency (EPA) and voluntary commitments
to the New Jersey Department of Environmental Protection. These obligations and voluntary commitments include surveying, sampling and testing drinking water
in and around certain company sites and offering treatment or an alternative supply of drinking water if tests indicate the presence of PFOA in drinking water at or
greater than the national Provisional Health Advisory.
Drinking Water Actions
In August 2001, a class action, captioned Leach v. DuPont, was filed in West Virginia state court alleging that residents living near the Washington Works facility
had suffered, or may suffer, deleterious health effects from exposure to PFOA in drinking water.
F- 32
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
DuPont and attorneys for the class reached a settlement in 2004 that binds about 80,000 residents. In 2005, DuPont paid the plaintiffs’ attorneys’ fees and expenses
of $ 23 and made a payment of $ 70 , which class counsel designated to fund a community health project. Chemours, through DuPont, funded a series of health
studies which were completed in October 2012 by an independent science panel of experts (the C8 Science Panel). The studies were conducted in communities
exposed to PFOA to evaluate available scientific evidence on whether any probable link exists, as defined in the settlement agreement, between exposure to PFOA
and human disease. The C8 Science Panel found probable links, as defined in the settlement agreement, between exposure to PFOA and pregnancy-induced
hypertension, including preeclampsia, kidney cancer, testicular cancer, thyroid disease, ulcerative colitis and diagnosed high cholesterol.
In May 2013, a panel of three independent medical doctors released its initial recommendations for screening and diagnostic testing of eligible class members. In
September 2014, the medical panel recommended follow-up screening and diagnostic testing three years after initial testing, based on individual results. The
medical panel has not communicated its anticipated schedule for completion of its protocol. Through DuPont, Chemours is obligated to fund up to $ 235 for a
medical monitoring program for eligible class members and, in addition, administrative cost associated with the program, including class counsel fees. In January
2012, Chemours, through DuPont, put $ 1 in an escrow account to fund medical monitoring as required by the settlement agreement. The court-appointed Director
of Medical Monitoring has established the program to implement the medical panel’s recommendations and the registration process, as well as eligibility
screening, is ongoing. Diagnostic screening and testing has begun and associated payments to service providers are being disbursed from the escrow account. As of
December 31, 2015 , less than $ 1 has been disbursed from the escrow account related to medical monitoring.
In addition, under the settlement agreement, DuPont must continue to provide water treatment designed to reduce the level of PFOA in water to six area water
districts, including the Little Hocking Water Association (LHWA) and private well users.
Class members may pursue personal injury claims against DuPont only for those human diseases for which the C8 Science Panel determined a probable link exists.
At December 31, 2015 , there were approximately 3,500 lawsuits filed in various federal and state courts in Ohio and West Virginia. These lawsuits are
consolidated in multi-district litigation in Ohio federal court (MDL). Based on the information currently available to the Company, the majority of the lawsuits
allege personal injury claims associated with high cholesterol and thyroid disease from exposure to PFOA in drinking water. There are 37 lawsuits alleging
wrongful death. In the third quarter of 2014, six plaintiffs from the MDL were selected for individual trial. The first case (Bartlett v. DuPont) was tried to a verdict
on October 7, 2015. The Plaintiff alleged that PFOA in drinking water caused her kidney cancer with causes of action for negligence and negligent infliction of
emotional distress. The jury found in favor of the Plaintiff awarding $1.1 in damages for negligence and $0.5 for emotional distress. The jury found that DuPont’s
conduct did not warrant punitive damages. DuPont Management believes that rulings made before and during the trial resulted in several significant and
meritorious grounds for appeal, and an appeal to the Sixth Circuit will be filed. The second case (Wolf v. DuPont) set for trial in March 2016, has been settled for
an amount well below the incremental cost of preparing for trial. There are three more trials scheduled in 2016, with the next trial starting in May 2016.
In January 2016, the court announced that starting in April 2017, 40 individual plaintiff trials will be scheduled per year. This multi-year plan pertains only to the
cases claiming cancer, which represents approximately 7% of the total number of cases in the MDL. The remaining cases, comprising approximately 93% of the
docket, will remain inactive.
Chemours, through DuPont, denies the allegations in these lawsuits and is defending itself vigorously. Except for the Wolf v. DuPont case, no claims have been
settled or resolved during the periods presented.
Additional Actions
In addition to general claims of PFOA contamination of drinking water, LHWA brought an action claiming “imminent and substantial endangerment to health and
or the environment” under the Resource Conservation and Recovery Act (RCRA). The parties reached a confidential settlement in late November 2015. Final
papers were completed in February 2016.
PFOA Summary
While it is probable that the Company will incur costs related to the medical monitoring program discussed above, such costs cannot be reasonably estimated due
to uncertainties surrounding the level of participation by eligible class members and the scope of testing. Chemours believes that it is reasonably possible that it
could incur losses related to the MDL in Ohio federal court discussed above but such losses cannot be estimated at this time due to the uniqueness of the individual
MDL plaintiff's claims and Chemours' defenses to those claims, both as to potential liability and damages on an individual claim basis, and numerous unsettled
legal issues, among other factors. The trials and appeals of these matters will occur over the course of many years.
F- 33
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Significant unfavorable outcomes in a number of cases in the MDL could have a material adverse effect on Chemours' consolidated financial position, results of
operations or liquidity.
(d) Environmental
Chemours, by virtue of its status as a subsidiary of DuPont prior to the Distribution, is subject to contingencies pursuant to environmental laws and regulations that
in the future may require further action to correct the effects on the environment of prior disposal practices or releases of chemical substances by Chemours or
other parties. Chemours accrues for environmental remediation activities consistent with the policy set forth in Note 3. Much of this liability results from the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to as Superfund), RCRA and similar state and global laws.
These laws require Chemours to undertake certain investigative, remediation and restoration activities at sites where Chemours conducts or once conducted
operations or at sites where Chemours-generated waste was disposed. The accrual also includes estimated costs related to a number of sites identified for which it
is probable that environmental remediation will be required, but which are not currently the subject of enforcement activities.
Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated costs, depend on the mix of unique site
characteristics, evolving remediation technologies, diverse regulatory agencies and enforcement policies, as well as the presence or absence of other potentially
responsible parties. At December 31, 2015 , the Consolidated Balance Sheets included a liability of $ 290 , relating to these matters which, in management’s
opinion, is appropriate based on existing facts and circumstances. The average time frame, over which the accrued or presently unrecognized amounts may be paid,
based on past history, is estimated to be 15 to 20 years. Therefore, considerable uncertainty exists with respect to environmental remediation costs and, under
adverse changes in circumstances, the potential liability may range up to approximately $ 611 above the amount accrued at December 31, 2015 . Except for
Pompton Lakes, which is discussed further below, based on existing facts and circumstances, management does not believe that any loss, in excess of amounts
accrued, related to remediation activities at any individual site will have a material impact on the financial position, liquidity or results of operations of Chemours.
Pompton Lakes
The environmental remediation accrual at December 31, 2015 includes $ 87 related to activities at Chemours’ site in Pompton Lakes, New Jersey. Management
believes that it is reasonably possible that potential liability for remediation activities at this site could range up to $ 119 including previously accrued amounts.
This could have a material impact on the liquidity of Chemours in the period recognized. During the twentieth century, blasting caps, fuses and related materials
were manufactured at Pompton Lakes. Operating activities at the site were ceased in the mid 1990s. Primary contaminants in the soil and sediments are lead and
mercury. Ground water contaminants include volatile organic compounds.
Under the authority of the EPA and the New Jersey Department of Environmental Protection, remedial actions at the site are focused on investigating and cleaning
up the area. Ground water monitoring at the site is ongoing and Chemours has installed and continues to install vapor mitigation systems at residences within the
ground water plume. In addition, Chemours is further assessing ground water conditions. In June 2015, the EPA issued a modification to the site's RCRA permit
that requires Chemours to dredge mercury contamination from a 36 acre area of the lake and remove sediment from two other areas of the lake near the shoreline.
Chemours expects to spend about $ 50 over the next two to three years in connection with remediation activities commencing in mid-2016 at Pompton Lakes,
including activities related to the EPA’s proposed plan. These amounts are included in the remediation accrual at December 31, 2015 .
Note 20. Financial Instruments
Derivative Instruments
Objectives
and
Strategies
for
Holding
Derivative
Instruments
In the ordinary course of business, Chemours enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency risks. The Company has
established a derivative program to be utilized for financial risk management. This program reflects varying levels of exposure coverage and time horizons based
on an assessment of risk. The derivative program has procedures consistent with Chemours’ financial risk management policies and guidelines.
F- 34
Table of Contents
Foreign
Currency
Forward
Contracts
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Chemours uses foreign currency forward contracts to reduce its net exposure, by currency, related to non-functional currency-denominated monetary assets and
liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. These derivative instruments are not part of a
cash flow hedge program or a fair value hedge program, and have not been designated as a hedge. Although all of the forward contracts are subject to an
enforceable master netting agreement, Chemours has elected to present the derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets. No
collateral has been required for these contracts. All gains and losses resulting from the revaluation of the derivative assets and liabilities are recognized in other
income, net in the Consolidated Statements of Operations during the period in which they occurred.
At December 31, 2015 , there were 41 forward exchange currency contracts outstanding with an aggregate gross notional value of $ 288 . Chemours recognized a
net gain of $ 42 for the year ended December 31, 2015 , which is recorded in other income, net in the Consolidated Statements of Operations. There were no
forward contracts outstanding in 2014 or 2013 .
Net
Investment
Hedge
-
Foreign
Currency
Borrowings
Beginning on July 1, 2015, Chemours designated its €360 million Euro notes (see Note 18) as a hedge of its net investments in certain of its international
subsidiaries that use the Euro as functional currency in order to reduce the volatility in stockholders’ equity caused by the changes in foreign currency exchange
rates of the Euro with respect to the U.S. Dollar. Chemours used the spot method to measure the effectiveness of the net investment hedge. Under this method, for
each reporting period, the change in the carrying value of the Euro notes due to remeasurement of the effective portion is reported in accumulated other
comprehensive loss in the Consolidated Balance Sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in other
income, net in the Consolidated Statements of Operations. Chemours evaluates the effectiveness of its net investment hedge quarterly at the beginning of each
quarter. For the year ended December 31, 2015 , Chemours did not record any ineffectiveness and recognized gain of $8 on its net investment hedges within
accumulated other comprehensive income. There were no net investment hedges in 2014 or 2013 .
Fair
Value
of
Derivative
Instruments
The table below presents the fair value of Chemours’ derivative assets and liabilities within the fair value hierarchy, as described in Note 3 to the Consolidated
Financial Statements.
Balance Sheet Location
December 31, 2015
December 31, 2014
Fair Value Using Level 2 Inputs
Asset derivatives:
Foreign currency forward contracts
Accounts and notes receivable - trade, net
Total asset derivatives
Liability derivatives:
Foreign currency forward contracts
Other accrued liabilities
Total liability derivatives
$
$
$
$
2 $
2 $
2 $
2 $
—
—
—
—
We classify our foreign currency forward contracts in Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.
For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant
observable market inputs, such as foreign exchange rates and implied volatilities obtained from various market sources. Market inputs are obtained from well-
established and recognized vendors of market data and subjected to tolerance and quality checks.
F- 35
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Note 21. Long-Term Employee Benefits
Plans Covering Employees in the U.S.
Chemours sponsors a variety of employee benefit plans which cover substantially all U.S. employees. Prior to July 1, 2015, U.S. employees generally participated
in DuPont’s primary pension plan, the Retirement Savings Plan and certain other long-term employee benefit plans. In conjunction with the separation on July 1,
2015, Chemours employees stopped participating in DuPont plans and became participants in newly established Chemours plans. DuPont retained all liabilities
related to its U.S. plans post-separation.
On July 1, 2015, Chemours established a defined contribution plan, similar in design to the DuPont Retirement Savings plan, which covered all eligible
U.S. employees. The purpose of the Plan is to encourage employees to save for their future retirement needs. The plan is a tax qualified contributory profit sharing
plan, with cash or deferred arrangement, and any eligible employee of Chemours employees may participate. Chemours matches 100% of the first 6% of the
employee’s contribution election. Chemours may also provide an additional discretionary retirement savings contribution to eligible employees' eligible
compensation. The amount of this contribution, if any, is at the sole discretion of the Company. The plan's matching contributions vest immediately upon
contribution. The discretionary contribution vests for employees with at least three years of service.
In lieu of a defined benefit plan like DuPont’s primary pension plan, Chemours provides an enhanced 401(k) contribution for employees who previously
participated in DuPont’s pension plan. The enhanced benefits consist of an additional contribution of 1% to 7% of the employee’s eligible compensation depending
on the employee's length of service with DuPont at the time of separation. The plan will continue for a period up to 2019, subject to early termination.
Plans Covering Employees Outside the U.S.
Pension coverage for employees of Chemours non-U.S. subsidiaries is provided, to the extent deemed appropriate, through separate plans established after
separation and comparable to the DuPont plans in those countries. Obligations under such plans are funded by depositing funds with trustees, covered by insurance
contracts or are unfunded.
Participation in the Plans
Prior to July 1, 2015, Chemours participated in DuPont’s U.S. and non-U.S. plans, except for the plans in the Netherlands and Taiwan, as though they were
participants in a multi-employer plan with the other businesses of DuPont. The following table presents the multi-employer pension expense allocated by DuPont
to Chemours for the plans in which Chemours participated prior to separation. The allocation of cost was based on active employee headcount and is included in
the Consolidated Statement of Operations. These amounts do not represent cash payments to DuPont or DuPont’s plans.
Plan Name
EIN / Pension
Number
Year Ended December 31,
2015
2014
2013
DuPont Pension and Retirement Plan (U.S.)
51-0014090/001
$
All other U.S. and non-U.S. Plans
48 $
5
51 $
(1)
126
38
Single and Multiple Employer Plans
Beginning in the first quarter of 2015, Chemours has accounted for the plans covering its employees in the Netherlands and Taiwan as a multiple employer plan
and a single employer plan, respectively. In the third quarter of 2015, in connection with the separation, additional plans in Germany, Belgium, Japan, Korea,
Mexico and Switzerland were established. As of December 31, 2015, these plans were all accounted for as single employer plans.
F- 36
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
The net periodic benefit costs for the pension and amounts recognized in other comprehensive income for the year ended December 31, 2015 were as follows:
Year Ended December 31, 2015
Net periodic pension cost (income):
Service cost
Interest cost
Expected return on plan assets
Amortization of loss
Amortization of prior service cost
Net periodic pension income
Changes in plan assets and benefit obligations recognized in other comprehensive
income:
Net loss
Amortization of loss
Prior service credit
Amortization of prior service cost
Effect of foreign exchange rates
Total benefit recognized in other comprehensive income
Total recognized in net periodic pension income and other comprehensive income
The pre-tax amounts recognized in accumulated other comprehensive loss are summarized below:
Net loss
Prior service credit
Total amount recognized in accumulated other comprehensive loss
$
$
$
$
$
$
$
16
19
(83)
16
4
(28)
11
(16)
(24)
(4)
(33)
(66)
(94)
363
(16)
347
December 31, 2015
The estimated pre-tax net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive (loss)
income into net periodic benefit cost during 2016 are $ 20 and $2 , respectively.
F- 37
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Summarized information on the Company's pension benefit plans is as follows:
Year Ended December
31, 2015
Change in benefit obligation
Benefit obligation at beginning of year
$
Assumption and establishment of pension plans
Service cost
Interest cost
Plan participants' contributions
Actuarial loss (gain)
Benefits paid
Plan Amendments
Settlements & Transfers
Currency translation
Benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Assumption and establishment of pension plans
Actual loss on plan assets
Employer contributions
Plan participants' contributions
Benefits paid
Settlements & Transfers
Currency translation
Fair value of plan assets at end of year
Funded status at end of year
The net amounts recognized in the Consolidated Balance Sheet as of December 31, 2015 consist of:
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net amount recognized
The accumulated benefit obligation for all pension plans was $1,030 as of December 31, 2015.
F- 38
$
$
$
—
1,332
16
19
2
(76)
(39)
(24)
(6)
(118)
1,106
—
1,297
(7)
16
2
(39)
(6)
(123)
1,140
34
138
(2)
(102)
34
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
The following information relates to pension plans with projected and accumulated benefit obligations in excess of the fair value of plan assets at December 31,
2015:
Information for pension plans with projected benefit obligation in
excess of plan assets
December 31, 2015
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
$
194
158
93
Information for pension plans with accumulated benefit obligations in
excess of plan assets
December 31, 2015
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
$
190
157
90
Assumptions
The Company generally utilizes discount rates that are developed by matching the expected cash flows of each benefit plan to various yield curves constructed
from a portfolio of high quality, fixed income instruments provided by the plan’s actuary as of the measurement date. The expected rate of return on assets reflects
economic assumptions applicable to each country.
The following assumptions have been used to determine the benefit obligations and net benefit cost:
Weighted average assumptions used to determine benefit obligations and benefit cost
Discount rate
Rate of compensation increase 1
Expected return on plan assets
Pension Benefit Obligation at
December 31, 2015
Pension Income for the year
ended
December 31, 2015
2.4%
2.6%
N/A
1.7%
3.9%
7.2%
1 The rate of compensation increase represents the single annual effective salary increase that an average plan participant would receive during the participant's entire career at
Chemours.
Plan Assets
Each pension plan's assets are invested through a master trust fund. The strategic asset allocation for the trust fund is selected by management, reflecting the results
of comprehensive asset and liability modeling. Chemours establishes strategic asset allocation percentage targets and appropriate benchmarks for significant asset
classes with the aim of achieving a prudent balance between return and risk. Strategic asset allocations in countries are selected in accordance with the laws and
practices of those countries.
The weighted average target allocation for Chemours' pension plan assets is summarized as follows:
Cash and cash equivalents
U.S. and non-U.S. equity securities
Fixed income securities
Total
December 31, 2015
2.7%
42.3%
55.0%
100.0%
Fixed income securities include corporate issued, government issued and asset backed securities. Corporate debt investments encompass a range of credit risk and
industry diversification.
F- 39
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Fair value calculations may not be indicative of net realizable value or reflective of future fair values. Furthermore, although Chemours believes its valuation
methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain
financial instruments could result in a different fair value measurement at the reporting date.
The table below presents the fair values of Chemours' pension assets by level within the fair value hierarchy, as described in Note 3, as of December 31, 2015.
Asset Category:
Debt - government issued
$
465 $
7 $
Total
Level 1
Level 2
Debt - corporate issued
Debt - asset backed
U.S. and non U.S. equities
Derivatives - asset position
Derivatives - liability position
Cash and cash equivalents
Other
Pension trust payables 1
Total
$
148
33
460
4
(16)
40
6
1,140 $
(3)
1,137
1 Payables are primarily for investment securities purchased.
60
—
37
—
—
40
4
148 $
458
88
33
423
4
(16)
—
2
992
For pension plan assets classified as Level 1, total fair value is either the price of the most recent trade at the time of the market close or the official close price, as
defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without
consideration of transaction costs.
For pension benefit plan assets classified as Level 2, where the security is frequently traded in less active markets, fair value is based on the closing price at the end
of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any
terms specific to that asset or liability. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and
quality checks. For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on
significant observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatilities obtained from various
market sources.
Cash Flow
Defined Benefit Plan
DuPont contributed, on behalf of Chemours, $ 35 and $34 to its pension plans other than the principal U.S. pension plan in 2014 and 2013, respectively. DuPont
contributed, on behalf of Chemours, $ 66 and $58 to its other long-term employee benefit plans in 2014 and 2013, respectively. DuPont contributed, on behalf of
Chemours, $38 in the first half of 2015 to its pension and other long-term benefit plans and Chemours contributed $8 during 2015 to its pension plans. Chemours
expects to contribute $18 to its pension plans in 2016.
F- 40
Table of Contents
Estimated future benefit payments
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
The following benefit payments are expected to be paid over the next five years and the five years thereafter as of December 31, 2015:
2016
2017
2018
2019
2020
2021 - 2025
Defined Contribution Plan
$
42
45
44
47
47
250
DuPont’s contributions to the plan on behalf of Chemours were allocated in the amounts of $52 and $50 for the years ended December 31, 2014 and 2013,
respectively. In addition, DuPont contributed on behalf of Chemours about $26 to its defined contribution plans for the first half of 2015. From July 1 to December
31, 2015, Chemours contributed $28 to its defined contribution plan.
Note 22. Stock-based Compensation
Total stock-based compensation cost included in the Consolidated Statements of Operations was $17 , $7 and $6 for the years ended December 31, 2015 , 2014 and
2013 , respectively. The income tax benefits related to stock-based compensation arrangements were $7 , $3 and $2 for the years ended December 31, 2015 , 2014
and 2013 , respectively.
Stock-based compensation expense in prior years and until separation on July 1, 2015 was allocated to Chemours based on the portion of DuPont’s incentive stock
program in which Chemours employees participated. Adopted at separation, the Chemours Company Equity and Incentive Plan grants certain employees,
independent contractors, or non-employee directors of the Company different forms of awards, including stock options and RSUs. The equity and incentive plan
has maximum shares reserve for the grant of 13,500,000 plus the number of shares of converted awards (described below). Chemours Compensation Committee
determines the long-term incentive mix, including stock options and RSU, and may authorize new grants annually.
In accordance with the employee matters agreement between DuPont and Chemours, certain executives and employees were entitled to receive equity
compensation awards of Chemours in replacement of previously outstanding awards granted under various DuPont stock incentive plans prior to the separation. In
connection with the spin-off, these awards were converted into new Chemours equity awards using a formula designed to preserve the intrinsic value of the awards
immediately prior to the July 1, 2015 spin-off. At the date of conversion, total intrinsic value of the converted options was $18 . As a result of the conversion of
these awards, we recorded an approximate $3 incremental charge in the third quarter of 2015. The terms and conditions of the DuPont awards were replicated and
as necessary, adjusted to ensure that the vesting schedule and economic value of the awards was unchanged by the conversion.
Stock Options
Chemours granted non-qualified options to employees in July 2015 representing replacement of previously granted performance stock unit awards at DuPont. The
July 2015 grant will cliff vest March 1, 2018 and expire 10 years from date of grant. Other than those options, Chemours' expense related to stock options was
entirely related to options granted to replace outstanding option awards from DuPont that were converted to Chemours options on July 1, 2015.
The fair value related to stock options granted was determined using Black-Scholes option pricing model and the assumptions shown in the table below:
F- 41
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Risk-free interest rate
Expected term (years)
Volatility
Dividend yield
Fair value per stock option
Year Ended December 31,
2015
1.5%
5.4
42.0%
6.9%
3.17
$
The Company determined the dividend yield by dividing the expected annual dividend on the Company's stock by the option exercise price. A historical daily
measurement of volatility is determined based on Chemours peer companies' average volatility adjusted for the Company's debt leverage. The risk-free interest rate
is determined by reference to the yield on an outstanding U.S. Treasury note with a term equal to the expected life of the option granted. Expected life is
determined by reference to Chemours peer companies expected life and the historical experience of Chemours under the DuPont stock incentive plan prior to
separation.
The following table summarizes Chemours stock option activity for the year ended December 31, 2015.
Number of
Shares
(in thousands)
Weighted
Average
Exercise
Price(per share)
Weighted
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic Value
(in thousands)
Outstanding, December 31, 2014
Converted on July 1, 2015
Granted
Exercised
Forfeited
Expired
Outstanding, December 31, 2015
Exercisable, December 31, 2015
—
7,794 $
662
(22)
(150)
—
8,284 $
5,595 $
N/A
14.56
16.04
5.82
17.20
N/A
14.66
13.79
4.82 $
4.21 $
—
—
The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the Company's closing stock price on the last
trading day of December 31, 2015 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders
had all option holders exercised their in-the-money options at quarter end. The amount changes based on the fair market value of the Company's stock. Total
intrinsic value of options exercised for year ended December 31, 2015 was insignificant.
As of December 31, 2015 , there was $5 of unrecognized stock-based compensation expense related to stock options that is expected to be recognized over a
weighted-average period of 1.95 years.
RSUs
At the time of separation, in accordance with the employee matters agreement, the Company issued RSUs that serially vest over a three -year period and, upon
vesting, convert one -for-one to Chemours common stock to replace similar DuPont awards. Under the existing awards, a retirement eligible employee retains any
granted awards upon retirement provided the employee has rendered at least six months of service following the grant date. Additional RSUs were also granted to
key senior management employees with a performance condition. These RSUs vest on the third anniversary of the date of grant subject to the satisfaction of the
performance condition. The fair value of all stock-settled RSUs is based upon the market price of the underlying common stock as of the grant date.
Non-vested awards of RSUs, both with and without performance feature, as of December 31, 2015 are shown below. The weighted-average grant-date fair value
of RSUs granted and converted during 2015 was $14.94 .
F- 42
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Nonvested, December 31, 2014
Converted on July 1, 2015
Granted
Vested
Forfeited
Nonvested, December 31, 2015
Number of Shares
(in thousands)
Weighted Average
Grant Date
Fair Value
(per share)
— $
1,431
1,065
(133)
(14)
2,349
—
16.00
13.50
16.00
16.00
14.87
As of December 31, 2015 , there was $23 of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted-
average period of 2.12 years.
Note 23. Geographic and Segment Information
Geographic Information
For and As of the Year Ended December 31,
2015
2014
2013
Net Sales 1
Net Property, Plant
and Equipment
Net Sales 1
Net Property, Plant
and Equipment
Net Sales 1
Net Property, Plant
and Equipment
$
2,570 $
1,393
977
777
2,184 $
2,759 $
2,273 $
3,138 $
136
308
549
1,548
1,190
935
140
372
523
1,519
1,237
965
$
5,717 $
3,177 $
6,432 $
3,308 $
6,859 $
2,183
138
321
330
2,972
North America 2
Asia Pacific
EMEA 3
Latin America 4
Total
1 Net sales are attributed to countries based on customer location.
2 Includes net sales in Canada of $140 , $147 and $145 in 2015, 2014 and 2013, respectively. Includes net property, plant and equipment in Canada of $13 , $14 and $13 in
2015, 2014 and 2013, respectively.
3 EMEA includes Europe, Middle East and Africa.
4 Latin America includes Mexico.
Segment Information
Chemours’ operations are classified into three segments namely: Titanium Technologies, Fluoroproducts and Chemical Solutions. Corporate costs and certain legal
and environmental expenses that are not aligned with the segments and foreign exchange gains and losses are reflected in Corporate and Other.
The Titanium Technologies segment is the leading global producer of TiO2, a premium white pigment used to deliver opacity. The Fluoroproducts segment is a
leading global provider of fluoroproducts, such as refrigerants and industrial fluoropolymer resins. The Chemical Solutions segment is a leading North American
provider of industrial and specialty chemicals, which includes cyanides, sulfur products and performance chemicals and intermediates, used in gold production, oil
refining, agriculture, industrial polymers and other industries. Chemours operates globally in substantially all of its product lines.
In general, the accounting policies of the segments are the same as those described in Note 3. Products are transferred between segments on a basis intended to
reflect, as nearly as practicable, the market value of the products. Segment net assets includes net working capital, net property, plant and equipment, and other
noncurrent operating assets and liabilities of the segment. Depreciation and amortization includes depreciation on research and development facilities and
amortization of other intangible assets, excluding write-down of assets.
F- 43
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Adjusted EBITDA is the primary measure of segment profitability used by the Chief Operating Decision Maker (CODM) and is defined as income (loss) before
income taxes excluding the following:
•
•
•
•
•
•
•
interest expense, depreciation and amortization,
non-operating pension and other postretirement employee benefit costs,
exchange gains (losses),
employee separation, asset-related charges and other charges, net,
asset impairments,
gains (losses) on sale of business or assets, and
other items not considered indicative of our ongoing operational performance and expected to occur infrequently.
The tables presented below reflect the reclassification of certain corporate costs, certain legal and environmental expenses that are not aligned with our reportable
segments, and foreign exchange gains and losses from our reportable segments into Corporate and Other. All periods presented reflect the current definition of
Adjusted EBITDA.
Year Ended December 31,
2015
Net sales
Adjusted EBITDA
Depreciation and amortization
Equity in earnings of affiliates
Net assets
Investments in affiliates
Purchases of plant, property and equipment
2014
Net sales
Adjusted EBITDA
Depreciation and amortization
Equity in earnings of affiliates
Net assets
Investments in affiliates
Purchases of plant, property and equipment
2013
Net sales
Adjusted EBITDA
Depreciation and amortization
Equity in earnings of affiliates
Net assets
Investments in affiliates
Purchases of plant, property and equipment
Titanium
Technologies
Fluoroproducts
Chemical Solutions Corporate and Other
Total
$
2,392 $
2,230 $
1,095 $
326
125
—
1,659
—
255
300
88
21
1,567
127
142
29
52
—
839
—
117
— $
(82)
2
1
(3,935)
9
5
$
2,937 $
2,327 $
1,168 $
— $
723
125
—
1,748
—
365
282
83
20
1,480
124
133
17
48
—
782
—
106
(146)
1
—
(337)
—
—
$
3,019 $
2,379 $
1,461 $
— $
726
117
—
1,390
—
290
395
90
22
1,387
123
96
F- 44
101
53
—
734
—
52
(238)
1
—
(294)
—
—
5,717
573
267
22
130
136
519
6,432
876
257
20
3,673
124
604
6,859
984
261
22
3,217
123
438
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Total Adjusted EBITDA reconciles to total consolidated net (loss) income in the Consolidated Statements of Operations as follows:
Total Adjusted EBITDA
Interest
Depreciation and amortization
Non-operating pension and other postretirement employee benefit costs
Exchange gains (losses)
Asset impairments
Restructuring charges
Transaction, legal and other charges
(Loss) gain on sale of assets and businesses
(Loss) income before income taxes
(Benefit from) provision for income taxes
Net (loss) income
Year Ended December 31,
2015
2014
2013
$
573 $
876 $
(132)
(267)
3
19
(73)
(285)
(17)
(9)
(188)
(98)
—
(257)
(22)
(66)
—
(21)
—
40
550
149
$
(90) $
401 $
Note 24. Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), net of income taxes, consisted of:
Currency Translation
Adjustment
Net Investment Hedge
Employee Benefits
Total
Balance at December 31, 2012
Other comprehensive income (loss)
Balance at December 31, 2013
Other comprehensive income (loss)
Balance at December 31, 2014
Assumption and establishment of pension
plans, net
Other comprehensive income (loss)
Balance at December 31, 2015
$
$
19
$
—
19
—
19
—
(304)
(285)
$
F- 45
— $
—
$
—
—
—
—
—
8
—
—
—
—
(311)
52
8 $
(259)
$
984
—
(261)
(114)
(31)
—
(2)
—
—
576
152
424
19
—
19
—
19
(311)
(244)
(536)
Table of Contents
The Chemours Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars
in
millions,
except
per
share)
Note 25. Quarterly Financial Data (Unaudited)
The following is a summary of the quarterly results of operations for the years ended December 31, 2015 and 2014 .
For the three months ended
2015
March 31
June 30
September 30
December 31
Full Year
$
Net Sales
Cost of goods sold
Income (loss) before income taxes
Net income (loss)
Net income (loss) attributable to Chemours
Basic earnings (loss) per share 1
Diluted earnings (loss) per share 1
1,363 $
1,111
58
43
43
0.24
0.24
1,508 $
1,282
(18)
(18)
(18)
(0.10)
(0.10)
1,486
$
1,360
$
1,222
(107)
(29)
(29)
(0.16)
(0.16)
1,147
(121)
(86)
(86)
(0.48)
(0.48)
5,717
4,762
(188)
(90)
(90)
(0.50)
(0.50)
Net Sales
Cost of goods sold
Income before income taxes
Net income
Net income attributable to Chemours
Basic earnings per share 1
Diluted earnings per share 1
For the three months ended
2014
March 31
June 30
September 30
December 31
Full Year
$
1,569 $
1,240
132
98
98
0.54
0.54
1,682 $
1,311
155
116
116
0.64
0.64
1,632
$
1,273
143
108
107
0.59
0.59
1,549
$
1,248
120
79
79
0.44
0.44
6,432
5,072
550
401
400
2.21
2.21
1 On July 1, 2015, E. I. du Pont de Nemours and Company distributed 180,966,833 shares of Chemours' common stock to holders of its common stock. Basic and diluted
earnings (loss) per common share for all periods prior to July 1, 2015 were calculated using the shares distributed on July 1, 2015. Refer to Note 9 for information
regarding the calculation of basic and diluted earnings per share.
F- 46
Exhibit 10.26
AWARD TERMS OF
PERFORMANCE SHARE UNITS GRANTED UNDER THE
CHEMOURS COMPANY EQUITY AND INCENTIVE PLAN
______________________________________________________________________________________________________
Introduction
Grant Award Acceptance
Date of Grant
Type of Awards
Dividend Equivalents
Restricted Period
You have been granted Performance Share Units under The Chemours Company Equity
and Incentive Plan (“Plan”), subject to the following Award Terms. This grant is also
subject to the terms of the Plan, which are hereby incorporated by reference. However,
to the extent that an Award Term conflicts with the Plan, the Plan shall govern. Unless
otherwise defined herein, the terms defined in the Plan shall have the same defined
meanings in these Award Terms, including any appendices to these Award Terms
(hereinafter, collectively referred to as the “Agreement”). A copy of the Plan, and other
Plan-related materials, such as the Plan prospectus, are available at:
www.benefits.ml.com.
You must expressly accept the terms and conditions of your Award as set forth in this
Agreement. To accept, log on to Merrill Lynch Benefits OnLine at
www.benefits.ml.com, select Equity Plan > Grant Information > Pending
Acceptance .
IF YOU DO NOT ACCEPT YOUR PERFORMANCE SHARE UNITS IN THE
MANNER INSTRUCTED BY THE COMPANY, YOUR PERFORMANCE
SHARE UNITS WILL BE SUBJECT TO CANCELLATION.
[ ] (“Date of Grant”)
Performance Share Units (“PSUs”)
Dividends payable on the total number of shares represented by your Performance Share
Units (including whole and fractional Performance Share Units) will be allocated to your
account in the form of Performance Share Units (whole and fractional) based upon the
closing stock price on the date of the dividend payment. Dividend equivalent units will
be determined after the end of the Performance Period and credited to your account at
that time based on the performance-adjusted number of Performance Share Units in your
account. Dividend equivalent units will be calculated by taking the final performance-
adjusted Performance Share Units and calculating the dividend equivalent units for the
first dividend payment date for the Performance Period. The resulting number of
dividend equivalent units from the first dividend payment date will be added to the final
performance-adjusted number of Performance Share Units before calculating the
dividend equivalent units for the second dividend payment date during the Performance
Period. This process will be repeated for each subsequent dividend payment date during
the Performance Period.
You may not sell, gift, or otherwise transfer or dispose of any of the Performance Share
Units during the “Restricted Period.” The Restricted Period commences on the Date of
Grant and lapses as set forth herein.
Vesting Schedule
Termination of Employment
Under 55/10 Rule
Due to Lack of Work,
Divestiture to Entity Less
Than 50% Owned by
Chemours, Disability, or
Death
The Performance Share Units shall only vest if the performance goals set forth on
Exhibit A hereto (the “Performance Goals”) are satisfied as of the end of the
performance period running from [ - ] (the “Performance Period”). If Performance Share
Units are determined to be earned as of the Determination Date (as defined on Exhibit A
), the Restricted Period shall lapse with respect to such Performance Share Units on the
Determination Date. To the extent the Performance Goals are not satisfied, the
Performance Share Units that are subject to a Restricted Period will be forfeited.
For purposes of these Award Terms, “Retirement” shall mean the termination of your
employment (other than for Cause) after having attained age 55 and having provided at
least ten (10) years of service to the Company.
If you terminate employment after attainment of age 55 with at least 10 years of service
and either (i) you are an active employee for six months following the Date of Grant or
(ii) you have been notified by the Company or, if different, your employer (the
“Employer”), that your employment with the Company or Employer will terminate
because of either lack of work or divestiture to an entity less than 50% owned by
Chemours, the Units will remain subject to the Vesting Terms and will be paid in
accordance with the Payment provisions set forth herein. However, the number of Units
will be prorated based on the number of days you were employed from the Date of Grant
through the end of the Performance Period.
If the termination occurs after the end of the Performance Period but prior to the
Determination Date and the Performance Goals are satisfied, the Restricted Period will
lapse as indicated on Exhibit A on the Determination Date.
If the termination occurs prior to the end of the Performance Period and the Performance
Goals are satisfied, the Restricted Period will lapse as to a pro rata portion of the
Performance Share Units on the Determination Date. The prorated amount will be
determined by multiplying the number of Performance Share Units determined as
indicated on Exhibit A by a fraction, the numerator of which is the number of days from
the beginning of the Performance Period to the termination date, and the denominator of
which is the total number of days in the Performance Period.
If the Performance Goals are not satisfied, the Performance Share Units that are subject
to a Restricted Period will be forfeited.
Due to Any Other Reason
(such as voluntary
termination)
Performance Share Units that are subject to a Restricted Period will be forfeited.
2
Payment
Code Section 409A
Restricted Conduct
Performance Share Units, if earned, shall be paid to you when the Restricted Period
lapses in accordance with the schedule set forth under “Restricted Period.” Performance
Share Units are payable in one share of Stock for each whole unit and a cash payment
for any fraction of a unit. The value of each fractional unit will be based on the closing
price of Stock as reported on the Composite Tape of the New York Stock Exchange as
of the effective date of payment.
To the extent that an amount that is considered “nonqualified deferred compensation”
subject to Code Section 409A (“deferred compensation”) is payable on account of your
termination of employment, no amounts shall be paid hereunder on account thereof
unless such termination of employment constitutes a “separation from service,” within
the meaning of Code Section 409A. If you are a “specified employee,” within the
meaning of Code Section 409A, no amount that is deferred compensation shall be paid
or delivered, on account of your separation from service, earlier than the date that is six
months after such separation from service. Amounts otherwise payable during that six
month period shall be paid on the date that is six months and one day after your
separation from service.
The Performance Share Units are intended to be exempt from or compliant with Code
Section 409A and the U.S. Treasury Regulations relating thereto so as not to subject you
to the payment of additional taxes and interest under Code Section 409A or other
adverse tax consequences. In furtherance of this intent, the provisions of this Agreement
will be interpreted, operated, and administered in a manner consistent with these
intentions. The Committee may modify the terms of this Agreement, the Plan or both,
without your consent, in the manner that the Committee may determine to be necessary
or advisable in order to comply with Code Section 409A or to mitigate any additional
tax, interest and/or penalties or other adverse tax consequences that may apply under
Code Section 409A if compliance is not practical. This section does not create an
obligation on the part of the Company to modify the terms of this Agreement or the Plan
and does not guarantee that the Performance Share Units or the delivery of shares of
Stock upon vesting/settlement of the Performance Share Units will not be subject to
taxes, interest and penalties or any other adverse tax consequences under Code Section
409A. In no event whatsoever shall the Company be liable to any party for any
additional tax, interest or penalties that may be imposed on you by Code Section 409A
or any damages for failing to comply with Code Section 409A.
If you engage in any of the restricted conduct described in subparagraphs (i) through (iv)
below for any reason, in addition to all remedies in law and/or equity available to the
Company, you shall forfeit all Performance Share Units (whether or not vested) and
shall immediately pay to the Company, with respect to previously vested Performance
Share Units, a cash amount equal to the Fair Market Value of the Stock plus the cash
payment for any fraction of a unit received, without regard to any Tax-Related Items (as
defined below) that may have been deducted from such amount. For purposes of
subparagraphs (i) through (v) below, “Company” shall mean The Chemours Company
and/or any of its Subsidiaries or Affiliates that have employed you or retained your
services.
3
(i) Non-Disclosure of Confidential Information . During the course of your
employment with the Company and thereafter, you shall not use or disclose, except on
behalf of the Company and pursuant to the Company’s directions, any Company
“Confidential Information” (i.e., information concerning the Company and / or its
business that is not generally known outside the Company, which includes, but is not
limited to, (a) trade secrets; (b) intellectual property, including but not limited to
inventions, invention disclosures and patent applications; (c) information regarding the
Company’s present and/or future products, developments, processes and systems,
budgets, proposals, marketing plans, financial data and projections, suppliers, vendors,
inventions, formulas, data bases, know how, ideas, developments, experiments,
improvements, computer programs, software, technology, blue prints, specifications and
compilations of information; (d) information about employees and employee relations,
including but not limited to training manuals and procedures, recruitment method and
procedures, recruitment and distribution techniques, business plans and projections,
employment contracts and employee handbooks; (e) information on customers or
potential customers, including but not limited to customers’ names, sales records, prices,
particularities, preferences and manner of doing business, and other terms of sales and
Company cost information; and (f) information received in confidence by the Company
from third parties. Information regarding products, services or technological innovations
in development, in test marketing or being marketed or promoted in a discrete
geographic region, which information the Company is considering for broader use, shall
be deemed not generally known until such broader use is actually commercially
implemented.); and/or
(ii) Solicitation of Employees . During your employment and for a period of one year
following the termination of your employment for any reason, you shall not recruit,
solicit or induce, or cause, allow, permit or aid others to recruit, solicit or induce, any
employee, agent or consultant of the Company to terminate his/her employment or
association with the Company; and/or
(iii) Solicitation of Customers . During your employment and for a period of one year
following the termination of your employment for any reason, you shall not directly or
indirectly, on behalf of yourself or any other person, company or entity, call on, contact,
service or solicit competing business from customers or prospective customers of
Company if, within the two years prior to the termination of your employment, you had
or made contact with the customer, or received or had access to Confidential
Information about the customer; and/or
(iv) Non-Competition . During your employment and for a period of one year following
the termination of your employment for any reason, you shall not, directly or indirectly,
in any capacity, (a) compete or engage in a business similar to that of Company, (b)
compete or engage in a business similar to that which the Company has plans to engage,
or has engaged in during the two years prior to your termination, if, within this two-year
period, you received or had access to Confidential Information regarding the proposed
plans or the business in which Company engaged; or (c) take any action to invest in
(other than a non- controlling ownership of securities issued by publicly held
corporations), own, manage, operate, control, participate in, be employed or engaged by
or be connected in any manner with any partnership, corporation or other business or
entity engaging in a business similar to Company.
4
Recoupment Policy
Repayment/Forfeiture
Deferral
Withholding
(v) Geographic Scope. You acknowledge that due to the broad scope of Company’s
customer base, the following geographic scope for subsections (iii) - (iv) of this
Restricted Conduct section is necessary. Your non-competition and non-solicitation
obligations under this Agreement shall include: (a) any territory in which you performed
your duties for the Company; (b) any territory in which Company has customers about
which you received or had access to Confidential Information during your employment;
(c) any territory in which you solicited customers; or (d) any territory in which Company
plans to expand its market share about which you received or had access to Confidential
Information during your employment with Company.
This Award shall be subject to the Company’s Incentive Compensation Clawback Policy
(as it may be amended from time to time), the terms of which are incorporated herein by
reference.
Any benefits you may receive hereunder shall be subject to repayment or forfeiture as
may be required to comply with the requirements of the U.S. Securities and Exchange
Commission or any applicable law, including the requirements of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, or any securities exchange on which the
Stock is traded, as may be in effect from time to time.
If you are an officer of the Company, you may defer the settlement of this Award in
accordance with any procedures established by the Company for that purpose.
You acknowledge that the Company and/or your employer (the “Employer”) (1) make
no representations or undertakings regarding the treatment of any income tax, social
insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items
related to the Plan and legally applicable to you (“Tax-Related Items”) in connection
with any aspect of the Performance Share Units, including, but not limited to, the grant,
vesting or settlement of the Performance Share Units, the subsequent sale of shares of
Stock acquired pursuant to such settlement and the receipt of any dividends and/or any
dividend equivalents; and (2) do not commit to and are under no obligation to structure
the terms of the grant or any aspect of the Performance Share Units to reduce or
eliminate your liability for Tax- Related Items or achieve any particular tax result.
Further, if you are subject to Tax-Related Items in more than one jurisdiction, the
Company and/or the Employer (or former employer, as applicable) may be required to
withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to any relevant taxable or tax withholding event, as applicable, you agree to make
adequate arrangements satisfactory to the Company and/or the Employer to satisfy all
Tax-Related Items. In this regard, you authorize the Company and/or the Employer, or
their respective agents, at their discretion, to satisfy the obligations with regard to all
Tax-Related Items by one or a combination of the following: (i) withholding from your
wages or other cash compensation paid to you by the Company and/or the Employer; or
(ii) withholding from proceeds of the sale of shares of Stock acquired upon settlement of
the Performance Share Units either through a voluntary sale or through a mandatory sale
arranged by the Company (on your behalf pursuant to this authorization without further
consent); or (iii) withholding in shares of Stock to be issued upon settlement of the
Performance Share Units.
5
If the obligation for Tax-Related Items is satisfied by withholding in shares of Stock, for
tax purposes, you are deemed to have been issued the full number of shares of Stock
subject to the vested Performance Share Units, notwithstanding that a number of the
shares of Stock are held back solely for the purpose of paying the Tax-Related Items.
Finally, you agree to pay to the Company or the Employer, any amount of Tax- Related
Items that the Company or the Employer may be required to withhold or account for as a
result of your participation in the Plan that cannot be satisfied by the means previously
described. The Company may refuse to issue or deliver the shares or the proceeds of the
sale of shares of Stock, if you fail to comply with your obligations in connection with
the Tax-Related Items.
Notwithstanding anything in this section to the contrary, to avoid a prohibited
acceleration under Code Section 409A, if shares of Stock subject to the Performance
Share Units will be withheld (or sold on your behalf) to satisfy any Tax Related Items
arising prior to the date of settlement of the Performance Share Units for any portion of
the Performance Share Units that is considered nonqualified deferred compensation
subject to Code Section 409A, then the number of shares withheld (or sold on your
behalf) shall not exceed the number of shares that equals the liability for Tax-Related
Items.
The provisions of this Agreement are severable and if any one or more provisions are
determined to be illegal or otherwise unenforceable, in whole or in part, the remaining
provisions shall nevertheless be binding and enforceable.
You acknowledge that a waiver by the Company of breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other provision of this
Agreement, or of any subsequent breach by you or any other participant.
Notwithstanding any provisions in these Award Terms, the Performance Share Units
shall be subject to the additional terms and conditions set forth in Appendix A to this
Agreement and to any special terms and provisions as set forth in Appendix B for your
country, if any. Moreover, if you relocate to one of the countries included in Appendix
B, the special terms and conditions for such country will apply to you, to the extent the
Company determines that the application of such terms and conditions is necessary or
advisable for legal or administrative reasons. Appendix A and B constitute part of these
Award Terms.]
The Company reserves the right to impose other requirements on your participation in
this Agreement, on the Performance Share Units and on any shares of Stock acquired
under the Plan, to the extent the Company determines it is necessary or advisable for
legal or administrative reasons, and to require you to sign any additional agreements or
undertakings that may be necessary to accomplish the foregoing.
6
Severability
Waiver
[INTERNATIONAL AWARDS:
Appendix
Imposition of Other
Requirements
Exhibit A
Performance Goals
[Provided to award holders following Committee approval.]
[INTERNATIONAL AWARDS: APPENDIX A]
ADDITIONAL TERMS AND CONDITIONS
This Appendix includes additional terms and conditions that govern the Performance Share Units. These terms and conditions are in
addition to, or, if so indicated, in place of, the terms and conditions set forth in the Award Terms. Capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to them in the Award Terms or the Plan.
Data Privacy
You hereby explicitly and unambiguously consent to the collection, use and transfer, in
electronic or other form, of your personal data as described in this Agreement and any other
Performance Share Unit grant materials by and among, as applicable, the Employer, the
Company and its Subsidiaries or Affiliates for the exclusive purpose of implementing,
administering and managing your participation in the Plan.
You understand that the Company and the Employer may hold certain personal information
about you, including, but not limited to, your name, home address and telephone number, date
of birth, social insurance number or other identification number (e.g., resident registration
number), salary, nationality, job title, any stock or directorships held in the Company, details of
all Performance Share Units or any other entitlement to stock awarded, canceled, exercised,
vested, unvested or outstanding in your favor, for the exclusive purpose of implementing,
administering and managing the Plan (“Data”).
You understand that Data will be transferred to any third parties assisting the Company with
the implementation, administration and management of the Plan. You understand that the
recipients of the Data may be located in the United States or elsewhere, and that the recipients’
country (e.g., the United States) may have different data privacy laws and protections than your
country. You understand that you may request a list with the names and addresses of any
potential recipients of the Data by contacting your local human resources representative. You
authorize the Company, its Subsidiaries and Affiliates, the Employer and any other possible
recipients which may assist the Company (presently or in the future) with implementing,
administering and managing the Plan to receive, possess, use, retain and transfer the Data, in
electronic or other form, for the sole purpose of implementing, administering and managing
your participation in the Plan. You understand that Data will be held only as long as is
necessary to implement, administer and manage your participation in the Plan. You understand
that you may, at any time, view Data, request additional information about the storage and
processing of Data, require any necessary amendments to Data or refuse or withdraw the
consent herein, in any case without cost, by contacting in writing your local human resources
representative. Further, you understand that you are providing the consent herein on a purely
voluntary basis. If you do not consent, or if you later seek to revoke your consent, your
employment status or service and career with the Employer will not be adversely affected; the
only consequence of refusing or withdrawing your consent is that the Company would not be
able to grant you Performance Share Units or other awards or administer or maintain such
awards (i.e., the award would be null and void). Therefore, you understand that refusing or
withdrawing your consent may affect your ability to participate in the Plan. For more
information on the consequences of your refusal to consent or withdrawal of consent, you
understand that you may contact your local human resources representative.
Nature of Grant
By participating in the Plan, you acknowledge, understand and agree that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be
modified, amended, suspended or terminated by the Company at any time, to the extent permitted
by the Plan; (b) the grant of the Performance Share Units is voluntary and occasional and does not
create any contractual or other right to receive future grants, or benefits in lieu of Performance
Share Units, even if Performance Share Units have been granted in the past; (c) all decisions with
respect to future grants of Performance Share Units, if any, will be at the sole discretion of the
Company; (d) you are voluntarily participating in the Plan; (e) the Performance Share Units are
not intended to replace any pension rights or compensation; (f) unless otherwise agreed with the
Company, the Performance Share Units and the shares of Stock subject to the Performance Share
Units, and the income and value of same, are not granted as consideration for, or in connection
with, any service you may provide as a director of a Subsidiary or Affiliate; (g) the Performance
Share Units and the income and value of same are not part of normal or expected compensation
for any purpose including, without limitation, calculating any severance, resignation, termination,
redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or
retirement or welfare benefits or similar payments; (h) the future value of the underlying shares of
Stock is unknown, indeterminable and cannot be predicted with certainty; (i) no claim or
entitlement to compensation or damages shall arise from forfeiture of the Performance Share
Units resulting from the termination of your employment or other service relationship (for any
reason whatsoever, whether or not later found to be invalid or in breach of employment laws in
the jurisdiction where you are employed or the terms
of your employment agreement, if any), and in consideration of the grant of the Performance
Share Units to which you are otherwise not entitled, you irrevocably agree never to institute any
such claim against the Company, any of its Subsidiaries or Affiliates or the Employer, waive your
ability, if any, to bring any such claim, and release the Company, its Subsidiaries and Affiliates
and the Employer from any such claim; if, notwithstanding the foregoing, any such claim is
allowed by a court of competent jurisdiction, then, by participating in the Plan, you shall be
deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all
documents necessary to request dismissal or withdrawal of such claim; (j) for purposes of the
Performance Share Units, your employment or other service relationship will be considered
terminated as of the date you are no longer actively providing services to the Company or one of
its Subsidiaries or Affiliates (regardless of the reason for such termination and whether or not later
found to be invalid or in breach of employment laws in the jurisdiction where you are employed
or the terms of your employment agreement, if any), and unless otherwise expressly provided in
this Agreement or determined by the Company, your right to vest in the Performance Share Units
under this Agreement, if any, will terminate as of such date and will not be extended by any notice
period (e.g., your period of service would not include any contractual notice period or any period
of “garden leave” or similar period mandated under employment laws in the jurisdiction where
you are employed or the terms of your employment agreement, if any); the Committee shall have
the exclusive discretion to determine when you are no longer actively providing services for
purposes of the Performance Share Unit grant (including whether you may still be considered to
be providing services while on an approved leave of absence); (k) unless otherwise provided in
the Plan or by the Company in its discretion, the Performance Share Units and the benefits
evidenced by this Agreement do not create any entitlement to have the Performance Share Units
or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed
out or substituted for, in connection with any
corporate transaction affecting the shares of the Company; and (l) neither the Company, the
Employer nor any Subsidiary or Affiliate shall be liable for any foreign exchange rate fluctuation
between your local currency and the U.S. dollar that may affect the value of the Performance
Share Units or of any amount due to you pursuant to the settlement of the Performance Share
Units or the subsequent sale of any shares of Stock acquired upon settlement.
No Advice Regarding Grant The Company is not providing any tax, legal or financial advice, nor is the Company making any
Venue
Language
Electronic Delivery and
Acceptance
Insider Trading/Market
Abuse Laws
Foreign Asset/ Account
Reporting Requirements
recommendations regarding your participation in the Plan, or your acquisition or sale of the
underlying shares of Stock. You are hereby advised to consult with your own personal tax, legal
and financial advisors regarding your participation in the Plan before taking any action related to
the Plan.
Any and all disputes relating to, concerning or arising from this Agreement, or relating to,
concerning or arising from the relationship between the parties evidenced by the Performance
Share Units or this Agreement, shall be brought and heard exclusively in the United States District
Court for the District of Delaware or the Delaware Superior Court, New Castle County. Each of
the parties hereby represents and agrees that such party is subject to the personal jurisdiction of
said courts; hereby irrevocably consents to the jurisdiction of such courts in any legal or equitable
proceedings related to, concerning or arising from such dispute, and waives, to the fullest extent
permitted by law, any objection which such party may now or hereafter have that the laying of the
venue of any legal or equitable proceedings related to, concerning or arising from such dispute
which is brought in such courts is improper or that such proceedings have been brought in an
inconvenient forum .
If you have received this Agreement or any other document related to this Agreement translated
into a language other than English and if the meaning of the translated version is different than the
English version, the English version will control.
The Company may, in its sole discretion, decide to deliver any documents related to current or
future participation in the Plan by electronic means. You hereby consent to receive such
documents by electronic delivery and agree to participate in the Plan through an on-line or
electronic system established and maintained by the Company or a third party designated by the
Company.
You acknowledge that, depending on your country of residence, you may be subject to insider
trading restrictions and/or market abuse laws, which may affect your ability to acquire or sell
shares of Stock or rights to shares of Stock (e.g., Performance Share Units) under the Plan during
such times as you are considered to have “inside information” regarding the Company (as defined
by the laws in your country). Any restrictions under these laws or regulations are separate from
and in addition to any restrictions that may be imposed under the Company’s insider trading
policy. You acknowledge that it is your responsibility to comply with any applicable restrictions,
and you are advised to speak to your personal advisor on this matter.
Your country may have certain foreign asset and/or account reporting requirements which may
affect your ability to acquire or hold shares of Stock under the Plan or cash received from
participating in the Plan (including from any dividends received or sale proceeds arising from the
sale of shares of Stock) in a brokerage or bank account outside your country. You may be required
to report such accounts, assets or transactions to the tax or other
authorities in your country. You also may be required to repatriate sale proceeds or other funds
received as a result of your participation in the Plan to your country through a designated bank or
broker and/or within a certain time after receipt. You acknowledge that it is your responsibility to
comply with such regulations, and you should consult your personal legal advisor for any details.
[INTERNATIONAL AWARDS: APPENDIX B]
COUNTRY-SPECIFIC TERMS AND CONDITIONS
This Appendix includes additional terms and conditions that govern the Performance Share Units granted to you under the Plan if
you reside in one of the countries listed herein. These terms and conditions are in addition to, or if so indicated, in place of the terms
and conditions set forth in the Award Terms or Appendix A.
You should be aware that local exchange control laws may apply to you as a result of your participation in the Plan. By accepting the
Performance Share Units, you agree to comply with applicable exchange control laws associated with your participation in the Plan.
If you have any questions regarding your responsibilities in this regard, you agree to seek advice from your personal legal advisor, at
your own cost, and further agree that neither the Company nor any Subsidiary or Affiliate will be liable for any fines or penalties
resulting from your failure to comply with applicable laws.
If you are a citizen or resident of a country other than the one in which you are currently working, transfer employment after the
Performance Share Units are granted or are considered a resident of another country for local law purposes, the terms and conditions
contained herein may not be applicable to you, and the Company shall, in its discretion, determine to what extent the terms and
conditions contained herein shall apply to you.
BELGIUM
There are no country specific provisions.
BRAZIL
Compliance with Law . By accepting the Performance Share Units, you acknowledge that you agree to comply with applicable
Brazilian laws and pay any and all applicable taxes associated with the vesting of the Performance Share Units, the receipt of any
dividends, and the sale of shares of Stock acquired under the Plan.
Labor Law Acknowledgement. This provision supplements the acknowledgments contained in the Nature
of
Grant
section of
Appendix A:
By accepting the Performance Share Units, you agree that (i) you are making an investment decision, (ii) the shares of Stock will be
issued to you only if the vesting conditions are met and any necessary services are rendered by you over the vesting period, and (iii)
the value of the underlying shares of Stock is not fixed and may increase or decrease in value over the vesting period without
compensation to you.
CHINA
The following applies only to Grantees who are exclusively citizens of the People’s Republic of China (“China”) and who reside in
mainland China, as determined by the Company in its sole discretion.
Settlement of Performance Share Units and Sale of Shares. To facilitate compliance with exchange control requirements, you
agree to the sale of any shares of Stock to be issued to you upon vesting and settlement of the Award. The sale will occur (i)
immediately upon the vesting/settlement of the Performance Share Units, (ii) following your termination of employment from the
Company or one of its Subsidiaries or Affiliates, or (iii) within any other time frame as the Company determines to be necessary
to comply with local regulatory requirements. You further agree that the Company is authorized to instruct its designated broker to
assist with the mandatory sale of such shares (on your behalf pursuant to this authorization) and you expressly authorizes the
Company’s designated broker to complete the sale of such shares. You acknowledge that the Company’s designated broker is under
no obligation to arrange for the sale of the shares at any particular price. Upon the sale of the shares of Stock, the Company agrees to
pay you the cash proceeds from the sale, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related
Items. You agree that the payment of the cash proceeds will be subject to the repatriation requirements described below.
You further agree that any shares to be issued to you shall be deposited directly into an account with the Company’s designated
broker. The deposited shares shall not be transferable (either electronically or in certificate form) from the brokerage account. This
limitation shall apply both to transfers to different accounts with the same broker and to transfers to other brokerage firms. The
limitation shall apply to all shares of Stock issued to you under the Plan, whether or not you continue to be employed by the
Company or one of its Subsidiaries or Affiliates. If you sell shares of Stock issued upon vesting/settlement of the Performance Share
Units, the repatriation requirements described below shall apply.
Exchange Control Requirements . You understand and agree that, pursuant to local exchange control requirements, you will be
required to immediately repatriate to China the cash proceeds from the sale of shares of Stock acquired from the Performance Share
Units and any dividends. You further understand that, under local law, such repatriation of the cash proceeds may need to be effected
through a special exchange control account established by the Company or a Subsidiary or Affiliate of the Company and you hereby
consent and agree that the proceeds from the sale of shares of Stock acquired from the Performance Share Units, any dividends or
dividend equivalents may be transferred to such special account prior to being delivered to you. The proceeds may be paid in U.S.
dollars or local currency at the Company’s discretion. If the proceeds are paid in U.S. dollars, you acknowledge that you may be
required to set up a U.S. dollar bank account in China so that the proceeds may be delivered to this account. If the proceeds are
converted to local currency, you acknowledge that the Company (including its Subsidiaries and Affiliates) is under no obligation to
secure any currency conversion rate and may face delays in converting the proceeds to local currency due to exchange control
restrictions in China. You agree to bear any currency fluctuation risk between the date the shares of Stock acquired from the
Performance Share Units are sold and any dividends or dividend equivalents are paid and the time that (i) the Tax-Related Items are
converted to local currency and remitted to the tax authorities and (ii) net proceeds are converted to local currency and distributed to
you. You acknowledge that neither the Company nor any Subsidiary or Affiliate will be held liable for any delay in delivering the
proceeds to you. You agree to sign any agreements, forms and/or consents that may be requested by the Company or the Company’s
designated broker to effect any of the remittances, transfers, conversions or other processes affecting the proceeds.
Finally, you agree to comply with any other requirements that may be imposed by the Company in the future in order to facilitate
compliance with exchange control requirements in China.
FRANCE
Consent to Receive Information in English . By accepting the Award, you confirm having read and understood the documents
relating to this grant (the Plan and the Agreement) which were provided in the English language. You accept the terms of those
documents accordingly.
En
acceptant
l’attribution,
vous
confirmez
ainsi
avoir
lu
et
compris
les
documents
relatifs
à
cette
attribution
(le
Plan
et
ce
Contrat)
qui
ont
été
communiqués
en
langue
anglaise.
Vous
acceptez
les
termes
en
connaissance
de
cause.
GERMANY
There are no country specific provisions.
INDIA
There are no country specific provisions.
ITALY
Data Privacy . This provision replaces the Data
Privacy
section of Appendix A:
You understand that the Employer, the Company and any Subsidiary or Affiliate may hold certain personal information about
you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance (to the extent
permitted under Italian law) or other identification number, salary, nationality, job title, any shares of stock or directorships held
in the Company or any Subsidiary or Affiliate, details of all Performance Share Units or other entitlement to shares of stock or
equivalent benefits granted, awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the exclusive
purpose of implementing, managing and administering the Plan (“Data”).
You also understand that providing the Company with Data is necessary for the performance of the Plan and that your refusal to
provide such Data would make it impossible for the Company to perform its contractual obligations and may affect your ability to
participate in the Plan. The Controller of personal data processing is The Chemours Company, with registered offices at 1007
Market Street, Wilmington, DE 19801, United States of America, and, pursuant to Legislative Decree no. 196/2003, its
representative in Italy is Diego Negri, via Pontaccio 10 Milan. Italy.
You understand that Data will not be publicized, but it may be transferred to banks, other financial institutions, or brokers
involved in the management and administration of the Plan. You understand that Data may also be transferred to the Company’s
stock plan service provider, Bank of America Merrill Lynch, or such other administrator that may be engaged by the Company in
the future. You further understand that the Company and/or any Subsidiary or Affiliate will transfer Data among themselves as
necessary for the purpose of implementing, administering and managing your participation in the Plan, and that the Company
and/or any Subsidiary or Affiliate may each further transfer Data to third parties assisting the Company in the implementation,
administration, and management of the Plan, including any requisite transfer of Data to a broker or other third party with whom
you may elect to deposit any shares of Stock acquired at vesting of the Performance Share Units. Such recipients may receive,
possess, use, retain, and transfer Data in electronic or other form, for the purposes of implementing, administering, and
managing your participation in the Plan. You understand that these recipients may be located in or outside the European
Economic Area, such as in the United States or elsewhere. Should the Company exercise its discretion in suspending all
necessary legal obligations connected with the management and administration of the Plan, it will delete Data as soon as it has
completed all the necessary legal obligations connected with the management and administration of the Plan.
You understand that Data-processing related to the purposes specified above shall take place under automated or non-automated
conditions, anonymously when possible, that comply with the purposes for which Data is collected and with confidentiality and
security provisions, as set forth by applicable Italian data privacy laws and regulations, with specific reference to Legislative
Decree no. 196/2003.
The processing activity, including communication, the transfer of Data abroad, including outside of the European Economic
Area, as herein specified and pursuant to applicable Italian data privacy laws and regulations, does not require your consent
thereto as the processing is necessary to performance of contractual obligations related to implementation, administration, and
management of the Plan. You understand that, pursuant to Section 7 of the Legislative Decree no. 196/2003, you have the right
to, including but not limited to, access, delete, update, correct, or terminate, for legitimate reason, the Data processing.
Furthermore, you are aware that Data will not be used for direct marketing purposes. In addition, Data provided can be reviewed
and questions or complaints can be addressed by contacting your local human resources representative.
Plan Document Acknowledgment. In accepting the grant of the Performance Share Units, you acknowledge that you have received
a copy of the Plan and this Agreement and have reviewed the Plan and this Agreement in their entirety and fully understand and
accept all provisions of the Plan and this Agreement.
You acknowledge that you have read and specifically and expressly approved the following sections of this Agreement: Termination
of
Employment
; Withholding
; Imposition
of
Other
Requirements;
Nature
of
Grant
; Venue
; Language
; and the Data
Privacy
section included in this Appendix.
JAPAN
There are no country specific provisions.
MEXICO
No Entitlement or Claims for Compensation. These provisions supplement the Nature
of
Grant
section of Appendix A:
Modification. By accepting the Performance Share Units, you understand and agree that any modification of the Plan or the
Agreement or its termination shall not constitute a change or impairment of the terms and conditions of your employment.
Policy Statement. The Award of Performance Share Units the Company is making under the Plan is unilateral and discretionary
and, therefore, the Company reserves the absolute right to amend it and discontinue it at any time without any liability.
The Company, with registered offices at 1007 Market Street, Wilmington, Delaware 19801, U.S.A., is solely responsible for the
administration of the Plan and participation in the Plan and the acquisition of shares does not, in any way, establish an employment
relationship between you and the Company since you are participating in the Plan on a wholly commercial basis, and the sole
employer is Chemours Company nor does it establish any rights between you and the Employer.
Plan Document Acknowledgment. By accepting the Award of Performance Share Units, you acknowledge that you have received
copies of the Plan, have reviewed the Plan and the Agreement in their entirety and fully understand and accept all provisions of the
Plan and the Agreement.
In addition, by accepting the Agreement, you further acknowledge that you have read and specifically and expressly approve the
terms and conditions in the Agreement, in which the following is clearly described and established: (i) participation in the Plan does
not constitute an acquired right; (ii) the Plan and participation in the Plan is offered by the Company on a wholly discretionary basis;
(iii) participation in the Plan is voluntary; and (iv) the Company and any Subsidiary or Affiliates are not responsible for any decrease
in the value of the shares of Stock underlying the Performance Share Units.
Finally, you hereby declare that you do not reserve any action or right to bring any claim against the Company for any compensation
or damages as a result of your participation in the Plan and therefore grant a full and broad release to the Employer, the Company
and any Subsidiary or Affiliate with respect to any claim that may arise under the Plan.
Spanish Translation
Sin derecho a Compensación o a su reclamación. Las
presentes
disposiciones
complementan
el
apartado
denoninado
Naturaleza
del Otorgamiento de
los
Términos
del
Otorgamiento:
Modificación. Al
aceptar
las
Acciones
Restringidas,
usted
entiende
y
acepta
que,
cualquier
modificación
del
Plan
o
del
Contrato
o
su
terminación,
no
deberá
considerarse
como
un
cambio
o
menoscabo
a
las
condiciones
de
su
relación
de
trabajo.
Declaración de Políticas. El
Otorgamiento
de
Acciones
Restringidas
que
la
Empresa
está
llevando
a
cabo
en
términos
del
Plan,
es
unilateral
y
discrecional
y,
por
lo
tanto,
la
Empresa
se
reserva
el
derecho
de
modificar
e
interrumpir
el
mismo
en
cualquier
tiempo,
sin
responsabilidad
alguna.
La
Empresa,
con
domicilio
en
Market
Street
1007,
C.P.
19898,
Wilmington,
Delaware,
E.U.A.,
es
la
única
responsable
de
la
administración
del
Plan
y
la
participación
en
el
Plan,
y
la
adquisición
de
acciones
no
establece,
de
ninguna
manera,
una
relación
de
trabajo
entre
usted
y
la
Empresa,
en
virtud
de
que
su
participación
en
el
Plan
es
únicamente
de
carácter
comercial
y
su
único
patrón
es
Chemours
Company
y
tampoco
crea
ningún
derecho
entre
usted
y
su
Patrón..
Reconocimiento del Documento del Plan. Al
aceptar
el
Otorgamiento
de
las
Acciones
Restringidas,
usted
reconoce
heber
recibido
una
copia
del
Plan,
haber
revisado
el
mismo
,
asi
como
los
Términos
del
Otorgamiento
en
su
totalidad,
y
comprender
y
aceptar
en
su
totalidad
todas
las
disposiciones
contenidas
en
el
Plan
y
en
los
Términos
del
Otorgamiento.
Adicionalmente,
al
acceptar
los
Términos
del
Otorgamiento,
reconoce
que
ha
leído
y,
específica
y
expresamente,
acepta
los
términos
y
condiciones
contenidos
en
los
Términos
del
Otorgamiento,
en
los
que
claramente
se
describe
y
establece
lo
siguiente:
(i)
la
participación
en
el
Plan
no
constituye
un
derecho
adquirido;
(ii)
el
Plan
y
la
participación
en
el
Plan
es
ofrecida
por
la
Empresa
completamente
de
forma
discrecional;
(iii)
la
participación
en
el
Plan
es
voluntaria;
y
(iv)
la
Empresa,
así
como
sus
Subsidiarias
o
Filiales
no
serán
responsables
por
cualquier
disminución
en
el
valor
de
las
acciones
subyacentes
a
las
Acciones
Restringidas.
Finalmente,
por
el
presente,
usted
declara
que
no
se
reserva
acción
legal
alguna
o
derecho
a
ejercitar
en
contra
de
la
Empresa
por
cualquier
compensación
o
daños
que
se
generen
como
resultado
de
su
participación
en
el
Plan
en
virtud
de
ello,
usted
otorga
el
finiquito
más
amplio
que
en
Derecho
proceda
al
Patrón,
la
Empresa
y
sus
Subsidiarias
y
Filiales
respecto
a
cualquier
reclamación
o
demanda
que
pudiera
generarse
en
relación
con
el
Plan.
NETHERLANDS
There are no country specific provisions.
RUSSIA
U.S. Transaction. You understand that acceptance of the grant of the Performance Share Units results in a contract between you and
the Company completed in the United States and that the Agreement is governed by the laws of the State of Delaware, without
regard to choice of law principles thereof. Any Stock to be issued upon vesting of the Performance Share Units shall be delivered to
you through a brokerage account in the U.S. You may hold the Stock in your brokerage account in the U.S.; however, in no event
will Stock issued to you under the Plan be delivered to you in Russia. You are not permitted to sell the Stock directly to other
Russian legal entities or individuals.
Securities Law Information. You acknowledge that the Agreement, the grant of the Performance Share Units, the Plan and all other
materials you may receive regarding participation in the Plan do not constitute advertising or an offering of securities in Russia.
Absent any requirement under local law, the issuance of securities pursuant to the Plan has not and will not be registered in Russia
and therefore, the securities described in any Plan-related documents may not be used for offering or public circulation in Russia.
SINGAPORE
Securities Law Information. The grant of the Performance Share Units is being made pursuant to the “Qualifying Person”
exemption under section 273(1)(f) of the Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan has not been lodged
or registered as a prospectus with the Monetary Authority of Singapore. You should note that the Performance Share Units are
subject to section 257 of the SFA and you will not be able to make (i) any subsequent sale of Stock in Singapore or (ii) any offer of
such subsequent sale of Stock subject to the awards in Singapore, unless such sale or offer is made (a) after six months from the Date
of Grant or (b) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.
SOUTH KOREA
There are no country specific provisions.
SPAIN
Nature of Grant. This provision supplements the Nature
of
Grant
section of Appendix A:
By accepting the Performance Share Units, you consent to participation in the Plan and acknowledge that you have received a copy
of the Plan.
You understand and agree that, as a condition of the grant of the Performance Share Units, except as provided for in under the
Termination
of
Employment
section of the Award Terms, the termination of your employment for any reason (including for the
reasons listed below) will automatically result in the loss of the Performance Share Units that may have been granted to you and that
have not vested on the date of termination.
In particular, you understand and agree that any unvested Performance Share Units as of your termination date will be forfeited
without entitlement to the underlying shares of Stock or to any amount as indemnification in the event of a termination by reason of,
including, but not limited to: resignation, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or
recognized to be
without cause, individual or collective layoff on objective grounds, whether adjudged to be with cause or adjudged or recognized to
be without cause, “despido improcedente,” material modification of the terms of employment under Article 41 of the Workers’
Statute, relocation under Article 40 of the Workers’ Statute, Article 50 of the Workers’ Statute, unilateral withdrawal by the
Employer, and under Article 10.3 of Royal Decree 1382/1985.
Furthermore, you understand that the Company has unilaterally, gratuitously and in its sole discretion decided to grant the
Performance Share Units under the Plan to individuals who may be employees of the Company or any Subsidiary or Affiliate. The
decision is a limited decision that is entered into upon the express assumption and condition that any grant will not economically or
otherwise bind the Company or its Subsidiaries or Affiliates over and above the specific terms set forth in this Agreement.
Consequently, you understand that the Performance Share Units are granted on the assumption and condition that the Performance
Share Units and the shares of Stock issued at vesting shall not become a part of any employment or service contract (either with the
Company, the Employer or any Subsidiary or Affiliate) and shall not be considered a mandatory benefit, salary for any purposes
(including severance compensation) or any other right whatsoever. In addition, you understand that the grant of the Performance
Share Units would not be made to you but for the assumptions and conditions referred to above; thus, you acknowledge and freely
accept that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then any
grant to you of the Performance Share Units shall be null and void.
Securities Law Information. The Performance Share Units and the shares of Stock described in this Agreement do not qualify
under Spanish regulations as securities. No “offer of securities to the public,” as defined under Spanish law, has taken place or will
take place in the Spanish territory. The Agreement has not been nor will it be registered with the Comisión
Nacional
del
Mercado
de
Valores
, and does not constitute a public offering prospectus.
SWITZERLAND
Securities Law Information. The Performance Share Units are not intended to be publicly offered in or from Switzerland. Because
the offer of the Performance Share Units is considered a private offering, it is not subject to registration in Switzerland. Neither this
document nor any other materials relating to the Performance Share Units constitutes a prospectus as such term is understood
pursuant to article 652a of the Swiss Code of Obligations, and neither this document nor any other materials relating to the
Performance Share Units may be publicly distributed or otherwise made publicly available in Switzerland.
TAIWAN
There are no country specific provisions.
UNITED KINGDOM
Responsibility for Taxes. This provision supplements the Withholding
section of the Award Terms:
If payment or withholding of income tax is not made within 90 days of the end of the U.K. tax year in which the event giving rise to
the liability for income tax occurs (the “Due Date”) or such other period specified in Section 222(1)(c) of the U.K. Income Tax
(Earnings and Pensions) Act 2003, the amount of any uncollected income tax will constitute a loan owed by you to the Employer,
effective on the Due Date. You agree that the loan will bear interest at the then-current Official Rate of Her Majesty’s Revenue and
Customs (“HMRC”), it will be immediately due and repayable, and the Company or the Employer may
recover it at any time thereafter by any of the means referred to in the Withholding
section. Notwithstanding the foregoing, if you are
a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), you will not be eligible
for such a loan to cover the income tax liability. In the event that you are a director or executive officer and income tax is not
collected from or paid by you by the Due Date, the amount of any uncollected income tax may constitute a benefit to you on which
additional income tax and national insurance contributions may be payable. You will be responsible for reporting and paying any
income tax and national insurance contributions due on this additional benefit directly to HMRC under the self-assessment regime
and for reimbursing the Company or the Employer for any employee national insurance contributions due on this additional benefit,
which the Company or the Employer may recover at any time thereafter by any of the means referred to in the Withholding
section.
AWARD TERMS OF
CASH PERFORMANCE AWARD GRANTED UNDER
THE CHEMOURS COMPANY EQUITY AND INCENTIVE PLAN
_____________________________________________________________________________________
Exhibit 10.27
Introduction
Grant Award Acceptance
Date of Grant
Type of Award
Non-Transferable
Vesting Schedule
Termination of Employment
You have been granted a cash performance award (“Cash Performance Award”) under
The Chemours Company Equity and Incentive Plan (“Plan”), subject to the following
Award Terms. This Cash Performance Award is intended to constitute a “Cash‑Based
Award” under the Plan. This grant is also subject to the terms of the Plan, which is
hereby incorporated by reference. However, to the extent that an Award Term conflicts
with the Plan, the Plan shall govern. Unless otherwise defined herein, the terms defined
in the Plan shall have the same defined meanings in these Award Terms, including any
appendices to these Award Terms (hereinafter, collectively referred to as the
“Agreement”). A copy of the Plan, and other Plan-related materials, such as the Plan
prospectus, are available at: www.benefits.ml.com.
You must expressly accept the terms and conditions of your Award as set forth in this
Agreement. To accept, log on to Merrill Lynch Benefits OnLine at
www.benefits.ml.com, select Equity Plan > Grant Information > Pending
Acceptance .
IF YOU DO NOT ACCEPT YOUR CASH PERFORMANCE AWARD IN THE
MANNER INSTRUCTED BY THE COMPANY, YOUR CASH
PERFORMANCE AWARD WILL BE SUBJECT TO CANCELLATION.
[ ] (“Date of Grant”)
Cash Performance Award
You may not sell, gift, or otherwise transfer or dispose of the Cash Performance Award
prior to payment. The Cash Performance Award becomes payable as set forth herein.
The Cash Performance Award shall only vest and become payable if the performance
goals set forth on Exhibit A hereto (the “Performance Goals”) are satisfied as of the
end of the performance period running from [ - ] (the “Performance Period”). If an
amount is determined to be earned as of the Determination Date (as defined on Exhibit
A ), that amount shall become payable on the Determination Date. To the extent the
Performance Goals are not satisfied, no amount will be payable, and the Cash
Performance Award will lapse without value.
Under 55/10 Rule
For purposes of these Award Terms, “Retirement” shall mean the termination of your
employment other than for Cause after having attained age 55 and having provided at
least ten (10) years of service to the Company.
If you terminate employment after attainment of age 55 with at least 10 years of service
and either (i) you are an active employee for six months following the Date of Grant or
(ii) you have been notified by the Company or, if different, your employer (the
“Employer”), that your employment with the Company or Employer will terminate
because of either lack of work or divestiture to an entity less than 50% owned by
Chemours, the Award will remain subject to the Vesting Terms and will be paid in
accordance with the Payment provisions set forth herein. However, the amount will be
prorated based on the number of days you were employed from the Date of Grant
through the end of the Performance Period.
Due to Lack of Work,
Divestiture to Entity Less Than
50% Owned by Chemours,
Disability, or Death
If the termination occurs after the end of the Performance Period but prior to the
Determination Date and the Performance Goals are satisfied, an amount will become
payable as indicated on Exhibit A on the Determination Date.
Due to Any Other Reason
(such as voluntary
termination)
Code Section 409A
If the termination occurs prior to the end of the Performance Period and the
Performance Goals are satisfied, an amount will become payable as to a pro rata
portion of the amount determined to be earned on the Determination Date. The prorated
amount will be determined by multiplying the amount determined as indicated on
Exhibit A by a fraction, the numerator of which is the number of days from the
beginning of the Performance Period to the termination date, and the denominator of
which is the total number of days in the Performance Period.
If the Performance Goals are not satisfied, no amount will be payable, and the Cash
Performance Award will lapse without value.
The Cash Performance Award will be forfeited.
To the extent that an amount that is considered “nonqualified deferred compensation”
subject to Code Section 409A (“deferred compensation”) is payable on account of your
termination of employment, no amounts shall be paid hereunder on account thereof
unless such termination of employment constitutes a “separation from service,” within
the meaning of Code Section 409A. If you are a “specified employee,” within the
meaning of Code Section 409A, no amount that is deferred compensation shall be paid
or delivered, on account of your separation from service, earlier than the date that is six
months after such separation from service. Amounts otherwise payable during that six
month period shall be paid on the date that is six months and one day after your
separation from service.
2
Restricted Conduct
The Cash Performance Award is intended to be exempt from or compliant with Code
Section 409A and the U.S. Treasury Regulations relating thereto so as not to subject
you to the payment of additional taxes and interest under Code Section 409A or other
adverse tax consequences. In furtherance of this intent, the provisions of this
Agreement will be interpreted, operated, and administered in a manner consistent with
these intentions. The Committee may modify the terms of this Agreement, the Plan or
both, without your consent, in the manner that the Committee may determine to be
necessary or advisable in order to comply with Code Section 409A or to mitigate any
additional tax, interest and/or penalties or other adverse tax consequences that may
apply under Code Section 409A if compliance is not practical. This section does not
create an obligation on the part of the Company to modify the terms of this Agreement
or the Plan and does not guarantee that any amounts earned will not be subject to taxes,
interest and penalties or any other adverse tax consequences under Code Section 409A.
In no event whatsoever shall the Company be liable to any party for any additional tax,
interest or penalties that may be imposed on you by Code Section 409A or any
damages for failing to comply with Code Section 409A.
If you engage in any of the restricted conduct described in subparagraphs (i) through
(iv) below for any reason, in addition to all remedies in law and/or equity available to
the Company, you shall forfeit all Cash Performance Awards and shall immediately
pay to the Company, with respect to previously paid Cash Performance Awards, a cash
amount equal to the amount deemed paid, without regard to any Tax-Related Items (as
defined below) that may have been deducted from such amount. For purposes of
subparagraphs (i) through (v) below, “Company” shall mean The Chemours Company
and/or any of its Subsidiaries or Affiliates that have employed you or retained your
services.
(i) Non-Disclosure of Confidential Information . During the course of your
employment with the Company and thereafter, you shall not use or disclose, except on
behalf of the Company and pursuant to the Company’s directions, any Company
“Confidential Information” (i.e., information concerning the Company and / or its
business that is not generally known outside the Company, which includes, but is not
limited to, (a) trade secrets; (b) intellectual property, including but not limited to
inventions, invention disclosures and patent applications; (c) information regarding the
Company’s present and/or future products, developments, processes and systems,
budgets, proposals, marketing plans, financial data and projections, suppliers, vendors,
inventions, formulas, data bases, know how, ideas, developments, experiments,
improvements, computer programs, software, technology, blue prints, specifications
and compilations of information; (d) information about employees and employee
relations, including but not limited to training manuals and procedures, recruitment
method and procedures, recruitment and distribution techniques, business plans and
projections, employment contracts and employee handbooks; (e) information on
customers or potential customers, including but not limited to customers’ names, sales
records, prices, particularities, preferences and manner of doing business, and other
terms of sales and Company cost information; and (f) information received in
confidence by the
3
Company from third parties. Information regarding products, services or technological
innovations in development, in test marketing or being marketed or promoted in a
discrete geographic region, which information the Company is considering for broader
use, shall be deemed not generally known until such broader use is actually
commercially implemented.); and/or
(ii) Solicitation of Employees . During your employment and for a period of one year
following the termination of your employment for any reason, you shall not recruit,
solicit or induce, or cause, allow, permit or aid others to recruit, solicit or induce, any
employee, agent or consultant of the Company to terminate his/her employment or
association with the Company; and/or
(iii) Solicitation of Customers . During your employment and for a period of one year
following the termination of your employment for any reason, you shall not directly or
indirectly, on behalf of yourself or any other person, company or entity, call on,
contact, service or solicit competing business from customers or prospective customers
of Company if, within the two years prior to the termination of your employment, you
had or made contact with the customer, or received or had access to Confidential
Information about the customer; and/or
(iv) Non-Competition . During your employment and for a period of one year
following the termination of your employment for any reason, you shall not, directly or
indirectly, in any capacity, (a) compete or engage in a business similar to that of
Company, (b) compete or engage in a business similar to that which the Company has
plans to engage, or has engaged in during the two years prior to your termination, if,
within this two-year period, you received or had access to Confidential Information
regarding the proposed plans or the business in which Company engaged; or (c) take
any action to invest in (other than a non- controlling ownership of securities issued by
publicly held corporations), own, manage, operate, control, participate in, be employed
or engaged by or be connected in any manner with any partnership, corporation or
other business or entity engaging in a business similar to Company.
(v) Geographic Scope. You acknowledge that due to the broad scope of Company’s
customer base, the following geographic scope for subsections (iii) - (iv) of this
Restricted Conduct section is necessary. Your non-competition and non-solicitation
obligations under this Agreement shall include: (a) any territory in which you
performed your duties for the Company; (b) any territory in which Company has
customers about which you received or had access to Confidential Information during
your employment; (c) any territory in which you solicited customers; or (d) any
territory in which Company plans to expand its market share about which you received
or had access to Confidential Information during your employment with Company.
Recoupment Policy
This Award shall be subject to the Company’s Incentive Compensation Clawback
Policy (as it may be amended from time to time), the terms of which are incorporated
herein by reference.
4
Repayment/Forfeiture
Deferral
Withholding
Severability
Waiver
Any benefits you may receive hereunder shall be subject to repayment or forfeiture as
may be required to comply with the requirements of the U.S. Securities and Exchange
Commission or any applicable law, including the requirements of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, or any securities exchange on which the
Stock is traded, as may be in effect from time to time.
If you are an officer of the Company, you may defer the settlement of this Award in
accordance with any procedures established by the Company for that purpose.
You acknowledge that the Company and/or your employer (the “Employer”) (1) make
no representations or undertakings regarding the treatment of any income tax, social
insurance, payroll tax, fringe benefits tax, payment on account or other tax-related
items related to the Plan and legally applicable to you (“Tax-Related Items”) in
connection with any aspect of the Cash Performance Award, including, but not limited
to, the grant or payment of a Cash Performance Award; and (2) do not commit to and
are under no obligation to structure the terms of the grant or any aspect of the Cash
Performance Award to reduce or eliminate your liability for Tax- Related Items or
achieve any particular tax result. Further, if you are subject to Tax-Related Items in
more than one jurisdiction, the Company and/or the Employer (or former employer, as
applicable) may be required to withhold or account for Tax-Related Items in more than
one jurisdiction.
Prior to any relevant taxable or tax withholding event, as applicable, you agree to make
adequate arrangements satisfactory to the Company and/or the Employer to satisfy all
Tax-Related Items. In this regard, you authorize the Company and/or the Employer, or
their respective agents, at their discretion, to satisfy the obligations with regard to all
Tax-Related Items by withholding from your wages or other cash compensation paid to
you by the Company and/or the Employer.
Finally, you agree to pay to the Company or the Employer, any amount of Tax- Related
Items that the Company or the Employer may be required to withhold or account for as
a result of your participation in the Plan that cannot be satisfied by the means
previously described. The Company may refuse to issue or deliver the shares or the
proceeds of the sale of shares of Stock, if you fail to comply with your obligations in
connection with the Tax-Related Items.
The provisions of this Agreement are severable and if any one or more provisions are
determined to be illegal or otherwise unenforceable, in whole or in part, the remaining
provisions shall nevertheless be binding and enforceable.
You acknowledge that a waiver by the Company of breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other provision of this
Agreement, or of any subsequent breach by you or any other participant.
5
[INTERNATIONAL AWARDS:
Appendix
Notwithstanding any provisions in these Award Terms, the Cash Performance Award
shall be subject to the additional terms and conditions set forth in Appendix A to this
Agreement and to any special terms and provisions as set forth in Appendix B for your
country, if any. Moreover, if you relocate to one of the countries included in Appendix
B, the special terms and conditions for such country will apply to you, to the extent the
Company determines that the application of such terms and conditions is necessary or
advisable for legal or administrative reasons. Appendix A and B constitute part of these
Award Terms.]
Imposition of Other Requirements The Company reserves the right to impose other requirements on your participation in
this Agreement and on the Cash Performance Award, to the extent the Company
determines it is necessary or advisable for legal or administrative reasons, and to
require you to sign any additional agreements or undertakings that may be necessary to
accomplish the foregoing.
6
Exhibit A
Performance Goals
[Provided to award holders following Committee approval.]
A-1
[INTERNATIONAL AWARDS: APPENDIX A]
ADDITIONAL TERMS AND CONDITIONS
This Appendix includes additional terms and conditions that govern the Cash Performance Award. These terms and conditions are in
addition to, or, if so indicated, in place of, the terms and conditions set forth in the Award Terms. Capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to them in the Award Terms or the Plan.
Data Privacy
You hereby explicitly and unambiguously consent to the collection, use and transfer, in
electronic or other form, of your personal data as described in this Agreement and any
other Cash Performance Award grant materials by and among, as applicable, the
Employer, the Company and its Subsidiaries or Affiliates for the exclusive purpose of
implementing, administering and managing your participation in the Plan.
You understand that the Company and the Employer may hold certain personal
information about you, including, but not limited to, your name, home address and
telephone number, date of birth, social insurance number or other identification number
(e.g., resident registration number), salary, nationality, job title, any stock or directorships
held in the Company, details of all Cash Performance Awards or any other entitlement to
stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the
exclusive purpose of implementing, administering and managing the Plan (“Data”).
You understand that Data will be transferred to any third parties assisting the Company
with the implementation, administration and management of the Plan. You understand
that the recipients of the Data may be located in the United States or elsewhere, and that
the recipients’ country (e.g., the United States) may have different data privacy laws and
protections than your country. You understand that you may request a list with the names
and addresses of any potential recipients of the Data by contacting your local human
resources representative. You authorize the Company, its Subsidiaries and Affiliates, the
Employer and any other possible recipients which may assist the Company (presently or in
the future) with implementing, administering and managing the Plan to receive, possess,
use, retain and transfer the Data, in electronic or other form, for the sole purpose of
implementing, administering and managing your participation in the Plan. You
understand that Data will be held only as long as is necessary to implement, administer
and manage your participation in the Plan. You understand that you may, at any time,
view Data, request additional information about the storage and processing of Data,
require any necessary amendments to Data or refuse or withdraw the consent herein, in
any case without cost, by contacting in writing your local human resources representative.
Further, you understand that you are providing the consent herein on a purely voluntary
basis. If you do not consent, or if you later seek to revoke your consent, your employment
status or service and career with the Employer will not be adversely affected; the only
consequence of refusing or withdrawing your consent is that the Company would not be
able to grant you a Cash Performance Award or other awards or administer or maintain
such
A-2
Nature of Grant
awards (i.e., the award would be null and void). Therefore, you understand that refusing
or withdrawing your consent may affect your ability to participate in the Plan. For more
information on the consequences of your refusal to consent or withdrawal of consent, you
understand that you may contact your local human resources representative.
By participating in the Plan, you acknowledge, understand and agree that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and may
be modified, amended, suspended or terminated by the Company at any time, to the extent
permitted by the Plan; (b) the grant of the Cash Performance Award is voluntary and
occasional and does not create any contractual or other right to receive future grants, or
benefits in lieu of the Cash Performance Award, even if Cash Performance Awards have
been granted in the past; (c) all decisions with respect to future grants of Cash Performance
Awards, if any, will be at the sole discretion of the Company; (d) you are voluntarily
participating in the Plan; (e) the Cash Performance Award is not intended to replace any
pension rights or compensation; (f) unless otherwise agreed with the Company, the Cash
Performance Award, subject to the Cash Performance Award and the income and value of
same, are not granted as consideration for, or in connection with, any service you may
provide as a director of a Subsidiary or Affiliate; (g) the Cash Performance Award and the
income and value of same are not part of normal or expected compensation for any purpose
including, without limitation, calculating any severance, resignation, termination,
redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or
retirement or welfare benefits or similar payments; (h) no claim or entitlement to
compensation or damages shall arise from forfeiture of the Cash Performance Award
resulting from the termination of your employment or other service relationship (for any
reason whatsoever, whether or not later found to be invalid or in breach of employment laws
in the jurisdiction where you are employed or the terms of your employment agreement, if
any), and in consideration of the grant of the Cash Performance Award to which you are
otherwise not entitled, you irrevocably agree never to institute any such claim against the
Company, any of its Subsidiaries or Affiliates or the Employer, waive your ability, if any, to
bring any such claim, and release the Company, its Subsidiaries and Affiliates and the
Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed
by a court of competent jurisdiction, then, by participating in the Plan, you shall be deemed
irrevocably to have agreed not to pursue such claim and agree to execute any and all
documents necessary to request dismissal or withdrawal of such claim; (i) for purposes of
the Cash Performance Award, your employment or other service relationship will be
considered terminated as of the date you are no longer actively providing services to the
Company or one of its Subsidiaries or Affiliates (regardless of the reason for such
termination and whether or not later found to be invalid or in breach of employment laws in
the jurisdiction where you are employed or the terms of your employment agreement, if
any), and unless otherwise expressly provided in this Agreement or determined by the
Company, your right to earn any amount under the Cash Performance Award under this
Agreement, if any, will terminate as of such date and will not be extended by any notice
period (e.g., your period of service would not include any contractual notice period or any
period of “garden leave” or similar period mandated under employment laws in the
A-3
No Advice Regarding
Grant
Venue
jurisdiction where you are employed or the terms of your employment agreement, if any);
the Committee shall have the exclusive discretion to determine when you are no longer
actively providing services for purposes of the Cash Performance Award grant (including
whether you may still be considered to be providing services while on an approved leave of
absence); (j) unless otherwise provided in the Plan or by the Company in its discretion, the
Cash Performance Award and the benefits evidenced by this Agreement do not create any
entitlement to have the Cash Performance Award or any such benefits transferred to, or
assumed by, another company nor to be exchanged, cashed out or substituted for, in
connection with any corporate transaction affecting the shares of the Company; and (k)
neither the Company, the Employer nor any Subsidiary or Affiliate shall be liable for any
foreign exchange rate fluctuation between your local currency and the U.S. dollar that may
affect the value of the Cash Performance Award or of any amount due to you pursuant to the
payment of the Cash Performance Award.
The Company is not providing any tax, legal or financial advice, nor is the Company making
any recommendations regarding your participation in the Plan. You are hereby advised to
consult with your own personal tax, legal and financial advisors regarding your participation
in the Plan before taking any action related to the Plan.
Any and all disputes relating to, concerning or arising from this Agreement, or relating to,
concerning or arising from the relationship between the parties evidenced by the Cash
Performance Award or this Agreement, shall be brought and heard exclusively in the United
States District Court for the District of Delaware or the Delaware Superior Court, New
Castle County. Each of the parties hereby represents and agrees that such party is subject to
the personal jurisdiction of said courts; hereby irrevocably consents to the jurisdiction of
such courts in any legal or equitable proceedings related to, concerning or arising from such
dispute, and waives, to the fullest extent permitted by law, any objection which such party
may now or hereafter have that the laying of the venue of any legal or equitable proceedings
related to, concerning or arising from such dispute which is brought in such courts is
improper or that such proceedings have been brought in an inconvenient forum .
Language
Electronic Delivery and
Acceptance
If you have received this Agreement or any other document related to this Agreement
translated into a language other than English and if the meaning of the translated version is
different than the English version, the English version will control.
The Company may, in its sole discretion, decide to deliver any documents related to current
or future participation in the Plan by electronic means. You hereby consent to receive such
documents by electronic delivery and agree to participate in the Plan through an on-line or
electronic system established and maintained by the Company or a third party designated by
the Company.
A-4
Foreign Asset/ Account
Reporting Requirements
Your country may have certain foreign asset and/or account reporting requirements which
may affect your ability to acquire or hold cash received from participating in the Plan in a
brokerage or bank account outside your country. You may be required to report such
accounts, assets or transactions to the tax or other authorities in your country. You also may
be required to repatriate sale proceeds or other funds received as a result of your
participation in the Plan to your country through a designated bank or broker and/or within a
certain time after receipt. You acknowledge that it is your responsibility to comply with such
regulations, and you should consult your personal legal advisor for any details.
A-5
[INTERNATIONAL AWARDS: APPENDIX B]
COUNTRY-SPECIFIC TERMS AND CONDITIONS
[Provided to award holders as appropriate]
B-1
INDEMNIFICATION AGREEMENT
Exhibit 10.28
This Indemnification Agreement ("Agreement") is made as of ________ __, 201__ by and between The Chemours Company, a Delaware corporation (the
"Company"), and ______________ ("Indemnitee"). Except as provided herein, this Agreement supersedes and replaces any and all previous Agreements between
the Company and Indemnitee covering the subject matter of this Agreement.
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") believes that highly competent persons have become more reluctant to serve publicly-
held corporations as directors or officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;
WHEREAS, the Board has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis,
at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. The Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") and the Amended and Restated Bylaws (the "Bylaws") of the Company require indemnification of the officers
and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (the
"DGCL"). The Certificate of Incorporation, the Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and
thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to
indemnification;
WHEREAS, the uncertainties relating to such insurance and to indemnification may increase the difficulty of attracting and retaining such persons;
WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the
Company and its stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of,
such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not
be so indemnified;
WHEREAS, this Agreement is a supplement to and in furtherance of the Certificate of Incorporation and the Bylaws and any resolutions adopted pursuant
thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee does not regard the protection available under the Certificate of Incorporation and the Bylaws and insurance as adequate in the
present circumstances, and may not be willing to serve or continue to serve as an officer or director without adequate protection, and the Company desires
Indemnitee to serve or continue to serve in such capacity.
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
Section 1.
Services to the Company. Indemnitee agrees to serve as a director or officer of the Company or as an agent of the Company.
Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of
law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an
employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee. Indemnitee specifically acknowledges that if Indemnitee
is employed with the Company (or any of its subsidiaries or any Enterprise), such employment relationship is at will, and the Indemnitee may be discharged at any
time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any
of its subsidiaries or any Enterprise), other applicable formal severance policies duly adopted by the Board, or, with respect to service as a director or officer of the
Company, by the
1
Certificate of Incorporation, the Company's Bylaws, and the DGCL. The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee has
ceased to serve as a director, officer or agent of the Company as provided in Section 16 hereof.
Section 2.
Definitions. As used in this Agreement:
(a)
References to "agent" shall mean any person who is or was a director, officer, or employee of the Company or a subsidiary of the
Company or other person authorized by the Company to act for the Company, to include such person serving in such capacity as a director, officer, employee,
fiduciary or other official of another corporation, partnership, limited liability company, joint venture, trust or other enterprise at the request of, for the convenience
of, or to represent the interests of the Company or a subsidiary of the Company.
events:
(b)
A "Change in Control" shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following
Acquisition of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial Owner (as defined below),
directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding
securities unless the change in relative Beneficial Ownership of the Company's securities by any Person results solely from a reduction in the aggregate number of
outstanding shares of securities entitled to vote generally in the election of directors;
i.
ii.
Change in Board of Directors. During any period of two (2) consecutive years (not including any period prior to the
execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a transaction described in Sections 2(b)(i), 2(b)(iii) or 2(b)(iv)) whose election by the Board
or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the
members of the Board;
iii.
Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a
merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting securities of the Surviving Entity) more than 50% of the combined voting power of
the voting securities of the Surviving Entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board
of directors or other governing body of such Surviving Entity;
for the sale or disposition by the Company of all or substantially all of the Company's assets.
For purposes of this Section 2(b), the following terms shall have the following meanings:
iv.
Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement
(A) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.
(B) "Person" shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person
shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any
corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock
of the Company.
(C) "Beneficial Owner" shall have the meaning given to such term in Rule 13d-3 under the Exchange Act; provided, however, that
Beneficial Owner shall exclude any Person otherwise becoming a Beneficial Owner by reason of the stockholders of the Company approving a
merger of the Company with another entity.
(D) "Surviving Entity" shall mean the surviving entity in a merger or consolidation or any entity that controls, directly or indirectly,
such surviving entity.
2
"Corporate Status" describes the status of a person who is or was a director, officer, employee or agent of the Company or of any
other corporation, limited liability company, partnership or joint venture, trust or other enterprise which such person is or was serving at the request of the
Company.
(c)
(d)
indemnification is sought by Indemnitee.
"Disinterested Director" shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which
"Enterprise" shall mean the Company and any other corporation, limited liability company, partnership, joint venture, trust or other
enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, employee, agent or
fiduciary.
(e)
(f)
"Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts and other professionals,
witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign
taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other
disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or
preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting
from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or
its equivalent, and (ii) for purposes of Section 14(d) only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of
Indemnitee's rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount
of judgments or fines against Indemnitee.
(g)
"Independent Counsel" shall mean a law firm, or a member of a law firm, that is experienced in matters of corporation law and
neither presently is, nor in the past three years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than
with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person
who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in
an action to determine Indemnitee's rights under this Agreement.
(h)
The term "Proceeding" shall include any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration,
mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether
brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, legislative, or investigative (formal or informal) nature, including
any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of the fact that
Indemnitee is or was a director or officer of the Company, by reason of any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action
(or failure to act) on Indemnitee's part while acting pursuant to Indemnitee's Corporate Status, in each case whether or not serving in such capacity at the time any
liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses can be provided under this Agreement.
(i)
Reference to "other enterprise" shall include employee benefit plans; references to "fines" shall include any excise tax assessed with
respect to any employee benefit plan; references to "serving at the request of the Company" shall include any service as a director, officer, employee or agent of the
Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement.
Section 3.
Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this
Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to
procure a judgment in its favor, by reason of Indemnitee's Corporate Status. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent
permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses, judgments, fines and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on
Indemnitee's behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding had no reasonable cause to believe that
Indemnitee's conduct was unlawful. The parties hereto intend
3
that this Agreement shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by statute, including, without
limitation, any indemnification provided by the Certificate of Incorporation, the Bylaws, vote of its stockholders or disinterested directors or applicable law.
Section 4.
Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with
the provisions of this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to
procure a judgment in its favor by reason of Indemnitee's Corporate Status. Pursuant to this Section 4, Indemnitee shall be indemnified to the fullest extent
permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection with such Proceeding or
any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been
finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court (as hereinafter defined) or any court in which the
Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnification.
Section 5.
Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this
Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or
otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses
actually and reasonably incurred by Indemnitee in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits
or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses
actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection with or related to each successfully resolved claim, issue or matter to the
fullest extent permitted by law. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
Section 6.
Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the fullest extent
permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee's Corporate Status, a witness or otherwise asked to participate in any
Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on
Indemnitee's behalf in connection therewith.
Section 7.
Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company
for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to
which Indemnitee is entitled.
Section 8.
Additional Indemnification.
Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall indemnify Indemnitee to the fullest extent permitted by
applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a
judgment in its favor) by reason of Indemnitee's Corporate Status.
(a)
limited to:
(b)
For purposes of Section 8(a), the meaning of the phrase "to the fullest extent permitted by applicable law" shall include, but not be
agreement, or the corresponding provision of any amendment to or replacement of the DGCL, and
i.
to the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by
this Agreement that increase the extent to which a corporation may indemnify its officers and directors.
ii.
to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of
Section 9.
Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to
make any indemnification payment in connection with any claim involving Indemnitee:
except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or
(a)
for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision,
4
(b)
for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company
within the meaning of Section 16(b) of the Exchange Act (as defined in Section 2(b) hereof) or similar provisions of state statutory law or common law, (ii) any
reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee
from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting
restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), or Section 904 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of
Section 306 of the Sarbanes-Oxley Act) or (iii) any reimbursement of the Company by Indemnitee of any compensation pursuant to any compensation recoupment
or clawback policy adopted by the Board or the compensation committee of the Board, including but not limited to any such policy adopted to comply with stock
exchange listing requirements implementing Section 10D of the Exchange Act; or
(c)
except as provided in Section 14(d) of this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated
by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other
indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification,
in its sole discretion, pursuant to the powers vested in the Company under applicable law.
Section 10.
Advances of Expenses. Notwithstanding any provision of this Agreement to the contrary (other than Section 14(d)), the
Company shall advance, to the extent not prohibited by law, the Expenses incurred and paid by Indemnitee in connection with any Proceeding (or any part of any
Proceeding) not initiated by Indemnitee or any Proceeding initiated by Indemnitee with the prior approval of the Board as provided in Section 9(c), and such
advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time,
whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee's
ability to repay the Expenses and without regard to Indemnitee's ultimate entitlement to indemnification under the other provisions of this Agreement. In
accordance with Section 14(d), advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including
Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. The Indemnitee shall qualify for advances upon the
execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that the Indemnitee undertakes to repay the amounts
advanced (without interest) to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. No other form of
undertaking shall be required other than the execution of this Agreement. This Section 10 shall not apply to any claim made by Indemnitee for which indemnity is
excluded pursuant to Section 9.
Section 11.
(a)
Procedure for Notification and Defense of Claim.
Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or
advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. The written notification to the
Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement,
Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to
Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such
Proceeding. The omission by Indemnitee to notify the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee
hereunder or otherwise than under this Agreement except to the extent that such delay materially and adversely affects the Company’s ability to participate in the
defense of such Proceeding, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The
Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested
indemnification.
(b)
The Company will be entitled to participate in the Proceeding at its own expense and, except as otherwise provided below, to the
extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from the Company to
Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any
Expenses subsequently directly incurred by Indemnitee in connection with Indemnitee's defense of such Claim other than reasonable costs of investigation or as
otherwise provided below. Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after
notice from the Company of its assumption of the defense shall be at Indemnitee's own expense; provided , that if (i) Indemnitee's employment of its own legal
counsel has been authorized by the Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the
Company in the defense of such Claim, (iii) after a Change in Control, Indemnitee's employment of its own counsel has been approved by the Independent Counsel
or (iv) the Company shall not in fact
5
have employed counsel to assume the defense of such Claim, then Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm
plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.
Section 12.
Procedure Upon Application for Indemnification.
(a)
Upon written request by Indemnitee for indemnification pursuant to Section 11(a), a determination, if required by applicable law,
with respect to Indemnitee's entitlement thereto shall be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a
written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the
Disinterested Directors, even though less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the
Disinterested Directors, even though less than a quorum of the Board, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct,
by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee or (D) if so directed by the Board, by the stockholders
of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such
determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged
or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses
(including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne
by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom. The Company promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to
indemnification, including a description of any reason or basis for which indemnification has been denied.
(b)
In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12(a)
hereof, the Independent Counsel shall be selected as provided in this Section 12(b). If a Change in Control shall not have occurred, the Independent Counsel shall
be selected by the Board, and the Company shall give written notice to Indemnitee advising Indemnitee of the identity of the Independent Counsel so selected. If a
Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by
the Board, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the
Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection
shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided , however , that such objection
may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 2 of
this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected
shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent
Counsel unless and until such objection is withdrawn or the Delaware Court has determined that such objection is without merit. If, within twenty (20) days after
the later of submission by Indemnitee of a written request for indemnification pursuant to Section 11(a) hereof and the final disposition of the Proceeding, no
Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court for resolution of any
objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent
Counsel of a person selected by such court or by such other person as such court shall designate, and the person with respect to whom all objections are so resolved
or the person so appointed shall act as Independent Counsel under Section 12(a) hereof. Upon the due commencement of any judicial proceeding or arbitration
pursuant to Section 14(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
Section 13.
Presumptions and Effect of Certain Proceedings
(a)
In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such
determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 11(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by law,
have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that
presumption. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of
any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an
actual determination by the Company (including by its directors or Independent
6
Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct.
(b)
The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee's conduct was
unlawful.
(c)
For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee's action is
based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the directors or officers of
the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise
by an independent certified public accountant or by an appraiser, financial advisor or other expert selected with reasonable care by or on behalf of the Enterprise as
to matters Indemnitee reasonably believes are within such Person’s professional or expert competence. The provisions of this Section 13(d) shall not be deemed to
be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this
Agreement.
employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement
(d)
The knowledge and/or actions, or failure to act, of any director, officer, trustee, partner, managing member, fiduciary, agent or
Section 14.
Remedies of Indemnitee.
(a)
Subject to Section 14(e), in the event that (i) a determination is made pursuant to Section 12 of this Agreement that Indemnitee is
not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 10 of this Agreement, (iii) no
determination of entitlement to indemnification shall have been made pursuant to Section 12(a) of this Agreement within ninety (90) days after receipt by the
Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5, 6 or 7 or the second to last sentence of Section
12(a) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment of indemnification pursuant to Section 3, 4 or
8 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) in the event that the
Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or
Proceeding designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder, Indemnitee shall be
entitled to an adjudication by the Delaware Court of Indemnitee's entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at
Indemnitee's option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on
which Indemnitee first has the right to commence such proceeding pursuant to this Section 14(a). The Company shall not oppose Indemnitee's right to seek any
such adjudication or award in arbitration.
(b)
In the event that a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 shall be conducted in all respects as a de novo trial, or arbitration, on
the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this
Section 14 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.
(c)
If a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is entitled to indemnification,
the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 14, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request
for indemnification, or (ii) a prohibition of such indemnification under applicable law.
(d)
The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration
commenced pursuant to this Section 14 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any
such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that, to the fullest extent
permitted by law, the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee's
7
rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to
the Indemnitee hereunder. The Company shall, to the fullest extent permitted by law, indemnify Indemnitee against any and all Expenses and, if requested by
Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Expenses to
Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement of Expenses from the
Company under this Agreement or under any directors' and officers' liability insurance policies maintained by the Company if, in the case of indemnification,
Indemnitee is wholly successful on the underlying claims; if Indemnitee is not wholly successful on the underlying claims, then such indemnification shall be only
to the extent Indemnitee is successful on such underlying claims or otherwise as permitted by law, whichever is greater.
under this Agreement shall be required to be made prior to the final disposition of the Proceeding.
(e)
Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification
Section 15.
Non-exclusivity; Survival of Rights; Insurance; Subrogation.
(a)
The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive
of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any
right of Indemnitee under this Agreement in respect of any action taken or omitted by Indemnitee in Indemnitee's Corporate Status prior to such amendment,
alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of
Expenses than would be afforded currently under the Certificate of Incorporation, the Bylaws and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any
other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other right or remedy.
(b)
To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers,
employees, or agents of the Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the
coverage available for any such director, officer, employee or agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the
terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such claim or of the commencement of a
Proceeding, as the case may be, to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the
terms of such policies.
In the event of any payment made by the Company under this Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution
of such documents as are necessary to enable the Company to bring suit to enforce such rights
(c)
The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which
advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise.
(d)
(e)
The Company's obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the
Company as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other corporation, limited liability company, partnership,
joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement
of Expenses from such other corporation, limited liability company, partnership, joint venture, trust or other enterprise.
Section 16.
Duration of Agreement; Successors and Assigns. Due to the uncertain application of any statutes of limitations that may
govern any claim, this Agreement shall be of indefinite duration. The indemnification and advancement of expenses rights provided by or granted pursuant to this
Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased
8
to be a director, officer, employee or agent of the Company or of any other Enterprise, and shall inure to the benefit of Indemnitee and Indemnitee's spouse,
assigns, heirs, devisees, executors and administrators and other legal representatives.
Section 17.
Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any
reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed
reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
Section 18.
Enforcement.
The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it
hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this
Agreement in serving or continuing to serve as a director or officer of the Company.
(a)
(b)
This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this
Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws and applicable law, and shall not be deemed a substitute therefor,
nor to diminish or abrogate any rights of Indemnitee thereunder.
Section 19.
Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed
in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this
Agreement nor shall any waiver constitute a continuing waiver.
Section 20.
Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or
advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may
have to the Indemnitee under this Agreement or otherwise, except to the extent that the Company is materially and adversely prejudiced by such failure.
Section 21.
Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be
deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b)
mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight
courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by facsimile transmission, with receipt of
oral confirmation that such transmission has been received:
to the Company.
(a)
If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide
If to the Company to
(b)
The Chemours Company
1007 Market Street
Wilmington, Delaware 19899
Attn: Corporate Secretary
or to any other address as may have been furnished to Indemnitee by the Company.
Section 22.
Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement
is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee,
whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an
indemnifiable event under this Agreement,
9
in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the
Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its
directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
Section 23.
Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed
by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any
arbitration commenced by Indemnitee pursuant to Section 14(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree
that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Court of Chancery of the State of Delaware (the
"Delaware Court"), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the
exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the
extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801 as its agent in the State of Delaware as such party's agent for acceptance of legal process in
connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of
Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to
make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
Section 24.
Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes
be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this Agreement.
Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.
The headings of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
Section 25.
10
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.
THE CHEMOURS COMPANY
INDEMNITEE
By:
Name:
Office:
Name:
Address:
SUBSIDIARIES OF THE REGISTRANT
Exhibit 21
Organized Under Laws Of
Name
2463297 Ontario Limited
Antec International Ltd.
Baanhoekweg Energie Project BV
ChemFirst Inc.
Chemours Belgium BVBA
Chemours Chemicals Rus
Chemours Deutschland GmbH
Chemours EMEA 2, LLC
Chemours France SAS
Chemours Hong Kong Holding Limited
Chemours International 2, LLC
Chemours International Operations Sàrl
Chemours Italy S.r.l.
Chemours Jersey Ltd.
Chemours Kabushiki Kaisha
Chemours Korea Inc.
Chemours Netherlands 2, LLC
Chemours Netherlands BV
Chemours NL Holding 1 B.V.
Chemours NL Holding 2 B.V.
Chemours NL Holding 3 B.V.
Chemours NL Holding 4 B.V.
Chemours NL Holding 5 B.V.
Chemours Services Sàrl
Chemours Spain S.L.
Chemours Titanium Technologies (Taiwan) Ltd.
Chemours TR Kimyasal Ürünler Limited Şirketi
Dordrecht Energy Supply Company B.V.
Dordrecht Energy Supply Company C.V.
First Chemical Corporation
First Chemical Texas, L.P
Initiatives Inc. S.A. de C.V.
International Dioxcide, Inc.
Shenzhen Chemours Investment Co., Ltd.
TCC Holding 1 C.V.
TCC Holding 2 C.V.
TCC Holding 3 C.V.
The Chemours (Changshu) Fluoro Technology Company Limited
The Chemours (Taiwan) Company Limited
The Chemours (Thailand) Company Limited
The Chemours Canada Company
The Chemours Chemical (Shanghai) Company Limited
Canada
United Kingdom
Netherlands
Mississippi
Belgium
Russia
Germany
Delaware
France
Hong Kong
Delaware
Switzerland
Italy
Channel Islands
Japan
Korea
Delaware
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Switzerland
Spain
Taiwan
Turkey
Netherlands
Netherlands
Mississippi
Delaware
Mexico
Delaware
China
Netherlands
Netherlands
Netherlands
China
Taiwan
Thailand
Canada
China
Name
The Chemours Company
The Chemours Company (Australia) Pty Limited
The Chemours Company Asia Pacific Operations, Inc.
The Chemours Company Chile Limitada
The Chemours Company Colombia S.A.S.
The Chemours Company Delaware Operations, Inc.
The Chemours Company EMEA, LLC
The Chemours Company FC, LLC
The Chemours Company Industria E Comercio de Produtos Quimicos Ltda.
The Chemours Company International, LLC
The Chemours Company Malaysia Sdn. Bhd.
The Chemours Company Mexicana S. de R.L. de C.V.
The Chemours Company Mexico, S. de R.L. de C.V.
The Chemours Company Netherlands, LLC
The Chemours Company North America, Inc.
The Chemours Company S.R.L.
The Chemours Company Servicios, S. de R.L. de C.V.
The Chemours Company Singapore Pte. Ltd.
The Chemours Company TT, LLC
The Chemours Company Worldwide Operations, Inc.
The Chemours Holding Company, S. de R.L. de C.V.
The Chemours India Private Limited
Subsidiaries not listed would not, if considered in the aggregate as a single subsidiary, constitute a significant subsidiary.
Organized Under Laws Of
Delaware
Australia
Delaware
Chile
Colombia
Delaware
Delaware
Delaware
Brazil
Delaware
Malaysia
Mexico
Mexico
Delaware
Delaware
Argentina
Mexico
Singapore
Pennsylvania
Delaware
Mexico
India
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Forms S-8 (Nos. 333-205391, 333-205393, 333-205392) of The Chemours
Company of our report dated February 25, 2016 relating to the financial statements and financial statement schedule, which appears in this Form 10‑K.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 25, 2016
Exhibit 31.1
1.
2.
3.
4.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Mark P. Vergnano, certify that:
I have reviewed this Annual Report on Form 10-K of The Chemours Company;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)
b)
c)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Date:
February 25, 2016
By:
/s/ Mark P. Vergnano
Mark P. Vergnano
President and Chief Executive Officer
Exhibit 31.2
1.
2.
3.
4.
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Mark E. Newman, certify that:
I have reviewed this Annual Report on Form 10-K of The Chemours Company;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and have:
a)
b)
c)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Date:
February 25, 2016
By:
/s/ Mark E. Newman
Mark E. Newman
Senior Vice President and
Chief Financial Officer
Certification of CEO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1
In connection with the Annual Report of The Chemours Company (the “Company”) on Form 10-K for the year ended December 31, 2015 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”), Mark P. Vergnano, as Chief Executive Officer of the Company, hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/ Mark P. Vergnano
Mark P. Vergnano
Chief Executive Officer
February 25, 2016
Certification of CFO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2
In connection with the Annual Report of The Chemours Company (the “Company”) on Form 10-K for the period ended December 31, 2015 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), Mark E. Newman, as Chief Financial Officer of the Company, hereby certifies,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/ Mark E. Newman
Mark E. Newman
Chief Financial Officer
February 25, 2016
MINE SAFETY DISCLOSURES
Exhibit 95
The company owns and operates a surface mine near Starke, Florida. The following table provides information about citations, orders and notices issued from the
Mine Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act of 1977 (Mine Act) for the year ended December 31, 2015 .
Section
104
S&S 1
Citations
(#)
Section104(b)
Orders
(#)
Section
104(d)
Citations
and
Orders
(#)
Section
110(b)(2)
Violations
(#)
Section
107(a)
Orders
(#)
Total
Dollar
Value of
MSHA
Assessments
Proposed
($)
Total
Number
of
Mining
Related
Fatalities
(#)
Received
Notice of
Pattern of
Violations
Under
Section
104(e)
(yes/no)
Received
Notice of
Potential
to Have
Pattern
Under
Section
104(e)
(yes/no)
Legal
Actions
Pending
as of
Last Day
of Period
(#)
Legal
Actions
Initiated
During
Period
(#)
Legal
Actions
Resolved
During
Period
(#)
3
—
—
—
— $
3,490
—
No
No
—
—
6 2
Mine
(MSHA
Identification
Number)
Starke, FL
(0800225)
1
2
S&S refers to significant and substantial violations of mandatory health or safety standards under section 104 of the Mine Act.
During 2015, six legal actions were resolved, which resulted in 1 S&S designation from citations issued in 2014 being deleted.